Market Newsdesk

August 4, 2021 4:19 pm

MetLife Announces Second Quarter 2021 Results

MetLife Announces Second Quarter 2021 Results

NEW YORK–(BUSINESS WIRE)–
MetLife, Inc. (NYSE: MET) today announced its second quarter 2021 results.

Second Quarter Results Summary

Net income of $3.4 billion, or $3.83 per share, compared to net income of $68 million, or $0.07 per share, in the second quarter of 2020.
Adjusted earnings of $2.1 billion, or $2.37 per share, compared to adjusted earnings of $758 million, or $0.83 per share, in the second quarter of 2020.
Book value of $75.86 per share, down 4 percent from $78.65 per share at June 30, 2020.
Book value, excluding accumulated other comprehensive income (AOCI) other than foreign currency translation adjustments (FCTA), of $56.38 per share, up 8 percent from $52.27 per share at June 30, 2020.
Return on equity (ROE) of 21.2 percent.
Adjusted ROE, excluding AOCI other than FCTA, of 17.5 percent.
Holding company cash and liquid assets of $6.5 billion at June 30, 2021, which is well above the target cash buffer of $3.0 – $4.0 billion.

Commenting on the company’s results, MetLife President and CEO Michel Khalaf said: “MetLife’s outstanding financial results in the second quarter provide further evidence of the tremendous progress we’re making in executing on our Next Horizon Strategy. Our pillars of focus, simplify and differentiate were on full display through exceptional investment returns, expense discipline, and topline growth.”

Second Quarter 2021 Summary

($ in millions, except per share data)	Three months ended June 30,
	2021			2020			Change
Premiums, fees and other revenues	$	11,218		$	10,491		7	%
Net investment income	5,280			4,087			29	%
Net investment gains (losses)	1,605			231
Net derivative gains (losses)	421			(710		)
Total revenues	$	18,524		$	14,099

Total adjusted revenues	$	16,239		$	13,845		17	%
Adjusted premiums, fees and other revenues	$	11,122		$	10,401		7	%
Adjusted premiums, fees and other revenues, excluding pension risk transfers (PRT)	$	11,136		$	10,407		7	%

Net income (loss)	$	3,366		$	68
Net income (loss) per share	$	3.83		$	0.07

Adjusted earnings	$	2,089		$	758		176	%
Adjusted earnings per share	$	2.37		$	0.83		186	%
Adjusted earnings, excluding total notable items	$	2,023		$	758		167	%
Adjusted earnings, excluding total notable items per share	$	2.30		$	0.83		177	%

Book value per share	$	75.86		$	78.65		(4	)%
Book value per share, excluding AOCI other than FCTA	$	56.38		$	52.27		8	%

Expense ratio	19.0		%	21.0		%
Direct expense ratio, excluding total notable items related to direct expenses and PRT	11.4		%	12.4		%
Adjusted expense ratio, excluding total notable items related to other expenses and PRT	19.2		%	20.6		%

ROE	21.2		%	0.4		%
Adjusted ROE, excluding AOCI other than FCTA	17.5		%	6.4		%
Adjusted ROE, excluding total notable items (excludes AOCI other than FCTA)	17.0		%	6.4		%

MetLife reported second quarter 2021 premiums, fees and other revenues of $11.2 billion, up 7 percent over the second quarter of 2020. Adjusted premiums, fees and other revenues were $11.1 billion, up 7 percent, and up 5 percent on a constant currency basis from the prior-year period.

Net investment income was $5.3 billion, up 29 percent from the second quarter of 2020. Adjusted net investment income was $5.1 billion, up 49 percent from the prior-year period. These increases were largely driven by higher variable investment income primarily due to strong private equity returns.

Net derivative gains amounted to $421 million, or $333 million after tax during the quarter, primarily driven by lower long-term interest rates.

Net income was $3.4 billion, compared to net income of $68 million in the second quarter of 2020, primarily driven by an increase in adjusted earnings, a gain from the sale of the Property and Casualty business, and derivative gains in the current-year period relative to derivative losses in the prior-year period. On a per share basis, net income was $3.83, compared to net income of $0.07 in the prior-year period.

MetLife reported adjusted earnings of $2.1 billion, up 176 percent, and up 160 percent on a constant currency basis, from the second quarter of 2020. On a per share basis, adjusted earnings were $2.37, up 186 percent from the prior-year period.

Information regarding the non-GAAP and other financial measures included in this news release and reconciliation of the non-GAAP financial measures to GAAP measures are in “Non-GAAP and Other Financial Disclosures” below and in the tables that accompany this news release.

Supplemental slides for the second quarter of 2021, titled “2Q21 Supplemental Slides,” are available on the MetLife Investor Relations website at www.metlife.com and in the Form 8-K furnished by MetLife to the U.S. Securities and Exchange Commission in connection with this earnings news release.

Adjusted Earnings by Segment Summary*

	Three months ended June 30, 2021
Segment	Change from prior-year period	Change from prior-year period (on a constant currency basis)
U.S.	72%
Asia	103%	91%
Latin America	(27)%	(38)%
Europe, the Middle East and Africa (EMEA)	(19)%	(23)%
MetLife Holdings	NM
NM = Change not meaningful for the current period.

*The percentages in this table are on a reported and constant currency basis, and do not exclude notable items. For the three months ended June 30, 2021, U.S. results exclude Property & Casualty as MetLife completed the sale of the business. U.S. results for the three months ended June 30, 2020, include Property & Casualty.

Business Discussions

All comparisons of the results for the second quarter of 2021 in the business discussions that follow are with the second quarter of 2020, unless otherwise noted. The second quarter of 2021 notable items table follows the Business Discussions section of this release.

U.S.*

($ in millions)	Three months ended June 30, 2021	Three months ended June 30, 2020	Change
Adjusted earnings	$902	$523	72%
Adjusted premiums, fees and other revenues	$6,136	$5,692	8%
Adjusted premiums, fees and other revenues, excluding PRT	$6,150	$5,698	8%
Notable item(s)	$0	$0

* For the three months ended June 30, 2021, U.S. results exclude Property & Casualty as MetLife completed the sale of the business. U.S. results for the three months ended June 30, 2020, include Property & Casualty.

Adjusted earnings were $902 million, up 72 percent, largely from higher variable investment income primarily due to strong private equity returns. In the prior-year period, adjusted earnings included $83 million from Property & Casualty.
Adjusted return on allocated equity was 38.7 percent, and adjusted return on allocated tangible equity was 45.1 percent.
Adjusted premiums, fees and other revenues were $6.1 billion, up 8 percent, due primarily to the establishment of an unearned dental premium reserve and a premium credit to dental customers in the prior-year period and the addition of Versant Health to the company’s results, partially offset by the divestiture of Property & Casualty. In the prior-year period, adjusted premiums, fees and other revenues included $835 million from Property & Casualty.

Group Benefits

($ in millions)	Three months ended June 30, 2021	Three months ended June 30, 2020	Change
Adjustedearnings	$248	$248	—%
Adjusted premiums, fees and other revenues	$5,599	$4,346	29%
Notable item(s)	$0	$0

Adjusted earnings were flat at $248 million. Volume growth and the addition of Versant Health largely offset unfavorable underwriting.
Adjusted premiums, fees and other revenues were $5.6 billion, up 29 percent, due to the establishment of an unearned dental premium reserve and a premium credit to dental customers in the prior-year period, and the impact of participating contracts, where premiums, fees and other revenues can fluctuate with claims experience. Roughly 12 percent was driven by solid growth across most products, including voluntary, and the addition of Versant Health.
Sales were up 39 percent year-to-date due to higher jumbo case activity.

Retirement and Income Solutions

($ in millions)	Three months ended June 30, 2021	Three months ended June 30, 2020	Change
Adjustedearnings	$654	$192	241%
Adjusted premiums, fees and other revenues	$537	$511	5%
Adjusted premiums, fees and other revenues, excluding PRT	$551	$517	7%
Notable item(s)	$0	$0

Adjusted earnings were $654 million, up 241 percent, largely driven by higher variable investment income primarily due to strong private equity returns.
Adjusted premiums, fees and other revenues were $537 million, up 5 percent.
Excluding pension risk transfers, adjusted premiums, fees and other revenues were $551 million, up 7 percent.
Sales were down 16 percent year-to-date, primarily driven by lower sales of stable value products.

ASIA

($ in millions)	At or for the three months ended June 30, 2021	At or for the three months ended June 30, 2020	Change
Adjusted earnings	$520	$256	103%
Adjusted earnings (constant currency)	$520	$272	91%
Adjusted premiums, fees and other revenues	$2,037	$2,018	1%
Notable item(s)	$0	$0
General account assets under management (at amortized cost)	$129,411	$121,429	7%

Adjusted earnings were $520 million, up 103 percent, and up 91 percent on a constant currency basis, largely driven by higher variable investment income primarily due to strong private equity returns, as well as volume growth.
Adjusted return on allocated equity was 14.2 percent, and adjusted return on allocated tangible equity was 21.3 percent.
Adjusted premiums, fees and other revenues were $2.0 billion, up 1 percent, and flat on a constant currency basis.
General account assets under management (at amortized cost) were$129.4 billion, up 7 percent, and up 6 percent on a constant currency basis.

Sales were $498 million, up 42 percent on a constant currency basis.

LATIN AMERICA

($ in millions)

Three months ended June 30, 2021

Three months ended June 30, 2020

Change

Adjusted earnings

$97

$132

(27)%

Adjusted earnings (constant currency)

$97

$157

(38)%

Adjusted premiums, fees and other revenues

$934

$737

27%

Notable item(s)

$0

$0

Adjusted earnings were $97 million, down 27 percent, and down 38 percent on a constant currency basis, primarily driven by higher COVID-19 related claims and lower Chilean encaje returns, partially offset by higher variable investment income.

Adjusted return on allocated equity was 14.1 percent, and adjusted return on allocated tangible equity was 22.1 percent.

Adjusted premiums, fees and other revenues were $934 million, up 27 percent, and up 12 percent on a constant currency basis, driven by strong sales and persistency across the region.

Sales were $222 million, up 55 percent on a constant currency basis.

EMEA

($ in millions)

Three months ended June 30, 2021

Three months ended June 30, 2020

Change

Adjusted earnings

$94

$116

(19)%

Adjusted earnings (constant currency)

$94

$122

(23)%

Adjusted premiums, fees and other revenues

$744

$660

13%

Notable item(s)

$0

$0

Adjusted earnings were $94 million, down 19 percent, and down 23 percent on a constant currency basis, primarily driven by low utilization in the prior-year period and higher COVID-19 related claims in the current-year period, partially offset by volume growth.

Adjusted return on allocated equity was 13.2 percent, and adjusted return on allocated tangible equity was 22.6 percent.

Adjusted premiums, fees and other revenues were $744 million, up 13 percent, and up 8 percent on a constant currency basis, primarily driven by volume growth.

Sales were $236 million, up 20 percent on a constant currency basis, driven by growth across most markets.

METLIFE HOLDINGS

($ in millions)

Three months ended June 30, 2021

Three months ended June 30, 2020

Change

Adjusted earnings

$536

$20

NM

Adjusted premiums, fees and other revenues

$1,181

$1,208

(2)%

Notable item(s)

$0

$0

Adjustedearnings were $536 million, largely driven by higher variable investment income primarily due to strong private equity returns, as well as favorable life underwriting.

Adjusted return on allocated equity was 20.6 percent, and adjusted return on allocated tangible equity was 22.5 percent.

Adjustedpremiums, fees and other revenues were $1.2 billion, down 2 percent.

CORPORATE & OTHER

($ in millions)

Three months ended June 30, 2021

Three months ended June 30, 2020

Change

Adjusted earnings

$(60)

$(289)

NM

Notable item(s)

$66

$0

Corporate & Other had an adjusted loss of $60 million, compared to an adjusted loss of $289 million in the prior-year period. The notable item in the current quarter is related to the release of a legal reserve.

INVESTMENTS

($ in millions)

Three months ended June 30, 2021

Three months ended June 30, 2020

Change

Adjusted net investment income

$5,117

$3,444

49%

Adjusted net investment income was $5.1 billion, up 49 percent. Variable investment income was $1.2 billion, compared to $(555) million in the prior-year period, primarily driven by private equity returns of 9.7 percent.

SECOND QUARTER 2021 NOTABLE ITEMS

($ in millions)

Adjusted Earnings

Three months ended June 30, 2021

Notable Items

U.S.

Asia

Latin

America

EMEA

MetLife

Holdings

Corporate

&

Other

Total

Group Benefits

Retirement and Income Solutions

Litigation reserves and settlement costs

$0

$0

$0

$0

$0

$0

$66

$66

Total notable items

$0

$0

$0

$0

$0

$0

$66

$66

About MetLife

MetLife, Inc. (NYSE: MET), through its subsidiaries and affiliates (MetLife), is one of the world’s leading financial services companies, providing insurance, annuities, employee benefits and asset management to help its individual and institutional customers navigate their changing world. Founded in 1868, MetLife has operations in more than 40 markets globally and holds leading positions in the United States, Japan, Latin America, Asia, Europe and the Middle East. For more information, visit www.metlife.com.

Conference Call

MetLife will hold its second quarter 2021 earnings conference call and audio webcast on Thursday, August 5, 2021, from 9-10 a.m. (ET). The conference call will be available live via telephone and the internet. To listen via telephone, dial 877-692-8955 (U.S.) or 234-720-6979 (outside the U.S.). The participant access code is 2510803. To listen to the conference call via the internet, visit www.metlife.com and click the link to the webcast on the MetLife Investor Relations web page. Those who want to listen to the call via telephone or the internet should dial in or go to the website at least 15 minutes prior to the call to register, and/or download and install any necessary audio software.

The conference call will be available for replay via telephone and the internet beginning at 11 a.m. (ET) on Thursday, August 5, 2021, until Thursday, August 12, 2021, at 11:59 p.m. (ET). To listen to a replay of the conference call via telephone, dial 866-207-1041 (U.S.) or 402-970-0847 (outside the U.S.). The access code for the replay is 5532581. To access the replay of the conference call over the internet, visit the above-mentioned website.

Non-GAAP and Other Financial Disclosures

Any references in this news release (except in this section and the tables that accompany this release) to:

should be read as, respectively:

(i)

net income (loss);

(i)

net income (loss) available to MetLife, Inc.’s common shareholders;

(ii)

net income (loss) per share;

(ii)

net income (loss) available to MetLife, Inc.’s common shareholders per diluted common share;

(iii)

adjusted earnings;

(iii)

adjusted earnings available to common shareholders;

(iv)

adjusted earnings per share;

(iv)

adjusted earnings available to common shareholders per diluted common share;

(v)

book value per share;

(v)

book value per common share;

(vi)

book value per share, excluding AOCI other than FCTA;

(vi)

book value per common share, excluding AOCI other than FCTA;

(vii)

book value per share-tangible common stockholders’ equity;

(vii)

book value per common share-tangible common stockholders’ equity;

(viii)

return on equity;

(viii)

return on MetLife, Inc.’s common stockholders’ equity;

(ix)

adjusted return on equity, excluding AOCI other than FCTA; and

(ix)

adjusted return on MetLife, Inc.’s common stockholders’ equity, excluding AOCI other than FCTA; and

(x)

adjusted tangible return on equity.

(x)

adjusted return on MetLife, Inc.’s tangible common stockholders’ equity.

In this news release, MetLife presents certain measures of its performance on a consolidated and segment basis that are not calculated in accordance with accounting principles generally accepted in the United States of America (GAAP). MetLife believes that these non-GAAP financial measures enhance the understanding for MetLife and its investors of MetLife’s performance by highlighting the results of operations and the underlying profitability drivers of the business. Segment-specific financial measures are calculated using only the portion of consolidated results attributable to that specific segment.

The following non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP:

Non-GAAP financial measures:

Comparable GAAP financial measures:

(i)

total adjusted revenues;

(i)

total revenues;

(ii)

total adjusted expenses;

(ii)

total expenses;

(iii)

adjusted premiums, fees and other revenues;

(iii)

premiums, fees and other revenues;

(iv)

adjusted premiums, fees and other revenues, excluding PRT;

(iv)

premiums, fees and other revenues;

(v)

adjusted net investment income;

(v)

net investment income;

(vi)

adjusted capitalization of deferred policy acquisition costs (DAC);

(vi)

capitalization of DAC;

(vii)

adjusted earnings available to common shareholders;

(vii)

net income (loss) available to MetLife, Inc.’s common shareholders;

(viii)

adjusted earnings available to common shareholders, excluding total notable items;

(viii)

net income (loss) available to MetLife, Inc.’s common shareholders;

(ix)

adjusted earnings available to common shareholders per diluted common share;

(ix)

net income (loss) available to MetLife, Inc.’s common shareholders per diluted common share;

(x)

adjusted earnings available to common shareholders, excluding total notable items, per diluted common share;

(x)

net income (loss) available to MetLife, Inc.’s common shareholders per diluted common share;

(xi)

adjusted return on equity;

(xi)

return on equity;

(xii)

adjusted return on equity, excluding AOCI other than FCTA;

(xii)

return on equity;

(xiii)

adjusted return on equity, excluding total notable items (excludes AOCI other than FCTA);

(xiii)

return on equity;

(xiv)

adjusted tangible return on equity;

(xiv)

return on equity;

(xv)

investment portfolio gains (losses);

(xv)

net investment gains (losses);

(xvi)

derivative gains (losses);

(xvi)

net derivative gains (losses);

(xvii)

total MetLife, Inc.’s tangible common stockholders’ equity;

(xvii)

total MetLife, Inc.’s stockholders’ equity;

(xviii)

total MetLife, Inc.’s tangible common stockholders’ equity, excluding total notable items;

(xviii)

total MetLife, Inc.’s stockholders’ equity;

(xix)

total MetLife, Inc.’s common stockholders’ equity, excluding AOCI other than FCTA;

(xix)

total MetLife, Inc.’s stockholders’ equity;

(xx)

total MetLife, Inc.’s common stockholders’ equity, excluding total notable items (excludes AOCI other than FCTA);

(xx)

total MetLife, Inc.’s stockholders’ equity;

(xxi)

book value per common share, excluding AOCI other than FCTA;

(xxi)

book value per common share;

(xxii)

book value per common share – tangible common stockholders’ equity;

(xxii)

book value per common share;

(xxiii)

free cash flow of all holding companies;

(xxiii)

MetLife, Inc. (parent company only) net cash provided by (used in) operating activities;

(xxiv)

adjusted other expenses;

(xxiv)

other expenses;

(xxv)

adjusted other expenses, net of adjusted capitalization of DAC;

(xxv)

other expenses, net of capitalization of DAC;

(xxvi)

adjusted other expenses, net of adjusted capitalization of DAC, excluding total notable items related to adjusted other expenses;

(xxvi)

other expenses, net of capitalization of DAC;

(xxvii)

adjusted expense ratio;

(xxvii)

expense ratio;

(xxviii)

adjusted expense ratio, excluding total notable items related to adjusted other expenses and PRT;

(xxviii)

expense ratio;

(xxix)

direct expenses;

(xxix)

other expenses;

(xxx)

direct expenses, excluding total notable items related to direct expenses;

(xxx)

other expenses;

(xxxi)

direct expense ratio; and

(xxxi)

expense ratio; and

(xxxii)

direct expense ratio, excluding total notable items related to direct expenses and PRT.

(xxxii)

expense ratio.

Any of these financial measures shown on a constant currency basis reflect the impact of changes in foreign currency exchange rates and are calculated using the average foreign currency exchange rates for the most recent period and applied to the comparable prior period.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in this earnings news release and in this period’s quarterly financial supplement, which is available at www.metlife.com.

MetLife’s definitions of non-GAAP and other financial measures discussed in this news release may differ from those used by other companies:

Adjusted earnings and related measures

adjusted earnings;

adjusted earnings available to common shareholders;

adjusted earnings available to common shareholders on a constant currency basis;

adjusted earnings available to common shareholders, excluding total notable items;

adjusted earnings available to common shareholders, excluding total notable items, on a constant currency basis;

adjusted earnings available to common shareholders per diluted common share;

adjusted earnings available to common shareholders on a constant currency basis per diluted common share;

adjusted earnings available to common shareholders, excluding total notable items per diluted common share; and

adjusted earnings available to common shareholders, excluding total notable items, on a constant currency basis per diluted common share.

These measures are used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, adjusted earnings and components of, or other financial measures based on, adjusted earnings are also MetLife’s GAAP measures of segment performance. Adjusted earnings and other financial measures based on adjusted earnings are also the measures by which MetLife senior management’s and many other employees’ performance is evaluated for the purposes of determining their compensation under applicable compensation plans. Adjusted earnings and other financial measures based on adjusted earnings allow analysis of MetLife’s performance relative to its business plan and facilitate comparisons to industry results.

Adjusted earnings is defined as adjusted revenues less adjusted expenses, net of income tax. Adjusted loss is defined as negative adjusted earnings. Adjusted earnings available to common shareholders is defined as adjusted earnings less preferred stock dividends.

Adjusted revenues and adjusted expenses

These financial measures, along with the related adjusted premiums, fees and other revenues, focus on our primary businesses principally by excluding the impact of market volatility, which could distort trends, and revenues and costs related to non-core products and certain entities required to be consolidated under GAAP. Also, these measures exclude results of discontinued operations under GAAP and other businesses that have been or will be sold or exited by MetLife but do not meet the discontinued operations criteria under GAAP and are referred to as divested businesses. Divested businesses also include the net impact of transactions with exited businesses that have been eliminated in consolidation under GAAP and costs relating to businesses that have been or will be sold or exited by MetLife that do not meet the criteria to be included in results of discontinued operations under GAAP.

Adjusted revenues also excludes net investment gains (losses) (NIGL) and net derivative gains (losses) (NDGL). Adjusted expenses also excludes goodwill impairments.

The following additional adjustments are made to revenues, in the line items indicated, in calculating adjusted revenues:

Universal life and investment-type product policy fees excludes the amortization of unearned revenue related to NIGL and NDGL (Unearned revenue adjustments) and certain variable annuity guaranteed minimum income benefits (GMIB) fees (GMIB fees);

Net investment income: (i) includes adjustments for earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment (Investment hedge adjustments), (ii) excludes post-tax adjusted earnings adjustments relating to insurance joint ventures accounted for under the equity method (Operating joint venture adjustments), (iii) excludes certain amounts related to contractholder-directed equity securities (Unit-linked contract income), (iv) excludes certain amounts related to securitization entities that are variable interest entities (VIEs) consolidated under GAAP (Securitization entities income); and (v) includes distributions of profits from certain other limited partnership interests that were previously accounted for under the cost method, but are now accounted for at estimated fair value, where the change in estimated fair value is recognized in NIGL under GAAP (Certain partnership distributions); and

Other revenues is adjusted for settlements of foreign currency earnings hedges and excludes fees received in association with services provided under transition service agreements (TSA fees).

The following additional adjustments are made to expenses, in the line items indicated, in calculating adjusted expenses:

Policyholder benefits and claims and policyholder dividends excludes: (i) amortization of basis adjustments associated with de-designated fair value hedges of future policy benefits (PBC hedge adjustments), (ii) changes in the policyholder dividend obligation related to NIGL and NDGL (PDO adjustments), (iii) inflation-indexed benefit adjustments associated with contracts backed by inflation-indexed investments and amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and other pass-through adjustments (Inflation and pass-through adjustments), (iv) benefits and hedging costs related to GMIBs (GMIB costs), and (v) market value adjustments associated with surrenders or terminations of contracts (Market value adjustments);

Interest credited to policyholder account balances includes adjustments for earned income on derivatives and amortization of premium on derivatives that are hedges of policyholder account balances but do not qualify for hedge accounting treatment (PAB hedge adjustments) and excludes certain amounts related to net investment income earned on contractholder-directed equity securities (Unit-linked contract costs);

Amortization of DAC and value of business acquired (VOBA) excludes amounts related to: (i) NIGL and NDGL, (ii) GMIB fees and GMIB costs and (iii) Market value adjustments;

Amortization of negative VOBA excludes amounts related to Market value adjustments;

Interest expense on debt excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP (Securitization entities debt expense); and

Other expenses excludes: (i) noncontrolling interests, (ii) implementation of new insurance regulatory requirements costs (Regulatory implementation costs), and (iii) acquisition, integration and other costs. Other expenses includes TSA fees.

Adjusted earnings also excludes the recognition of certain contingent assets and liabilities that could not be recognized at acquisition or adjusted for during the measurement period under GAAP business combination accounting guidance.

The tax impact of the adjustments mentioned above are calculated net of the U.S. or foreign statutory tax rate, which could differ from MetLife’s effective tax rate. Additionally, the provision for income tax (expense) benefit also includes the impact related to the timing of certain tax credits, as well as certain tax reforms.

In addition, adjusted earnings available to common shareholders excludes the impact of preferred stock redemption premium, which is reported as a reduction to net income (loss) available to MetLife, Inc.’s common shareholders.

Investment portfolio gains (losses) and derivative gains (losses)

Theseare measures of investment and hedging activity. Investment portfolio gains (losses) principally excludes amounts that are reported within net investment gains (losses) but do not relate to the performance of the investment portfolio, such as gains (losses) on sales and divestitures of businesses and goodwill impairment, as well as investment portfolio gains (losses) of divested businesses. Derivative gains (losses) principally excludes earned income on derivatives and amortization of premium on derivatives, where such derivatives are either hedges of investments or are used to replicate certain investments, and where such derivatives do not qualify for hedge accounting. This earned income and amortization of premium is reported within adjusted earnings and not within derivative gains (losses).

Return on equity, allocated equity, tangible equity and related measures

Total MetLife, Inc.’s common stockholders’ equity, excluding AOCI other than FCTA: total MetLife, Inc.’s common stockholders’ equity, excluding the net unrealized investment gains (losses) and defined benefit plans adjustment components of AOCI, net of income tax.

Total MetLife, Inc.’s common stockholders’ equity, excluding total notable items (excludes AOCI other than FCTA): total MetLife, Inc.’s common stockholders’ equity, excluding the net unrealized investment gains (losses), defined benefit plans adjustment components of AOCI and total notable items, net of income tax.

Return on MetLife, Inc.’s common stockholders’ equity: net income (loss) available to MetLife, Inc.’s common shareholders divided by MetLife, Inc.’s average common stockholders’ equity.

Adjusted return on MetLife, Inc.’s common stockholders’ equity: adjusted earnings available to common shareholders divided by MetLife, Inc.’s average common stockholders’ equity.

Adjusted return on MetLife, Inc.’s common stockholders’ equity, excluding AOCI other than FCTA: adjusted earnings available to common shareholders divided by MetLife, Inc.’s average common stockholders’ equity, excluding AOCI other than FCTA.

Adjusted return on MetLife, Inc.’s common stockholders’ equity, excluding total notable items (excludes AOCI other than FCTA): adjusted earnings available to common shareholders, excluding total notable items, divided by MetLife, Inc.’s average common stockholders’ equity, excluding total notable items (excludes AOCI other than FCTA).

Allocated equity: portion of MetLife, Inc.’s common stockholders’ equity that management allocates to each of its segments and sub-segments based on local capital requirements and economic capital. Economic capital is an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide a basis upon which capital is deployed. MetLife management periodically reviews this model to ensure that it remains consistent with emerging industry practice standards and the local capital requirements; allocated equity may be adjusted if warranted by such review. Allocated equity excludes the impact of AOCI other than FCTA.

Adjusted return on allocated equity: adjusted earnings available to common shareholders divided by allocated equity.

The above measures represent a level of equity consistent with the view that, in the ordinary course of business, MetLife does not plan to sell most investments for the sole purpose of realizing gains or losses. Also, refer to the utilization of adjusted earnings and components of, or other financial measures based on, adjusted earnings mentioned above.

Total MetLife, Inc.’s tangible common stockholders’ equity or tangible equity: total MetLife, Inc.’s common stockholders’ equity, excluding AOCI other than FCTA, reduced by the impact of goodwill, value of distribution agreements (VODA) and value of customer relationships acquired (VOCRA), all net of income tax.

Total MetLife, Inc.’s tangible common stockholders’ equity, adjusted for total notable items: total MetLife, Inc.’s common stockholders’ equity, excluding AOCI other than FCTA, reduced by the impact of goodwill, value of distribution agreements (VODA), value of customer relationships acquired (VOCRA) and total notable items, all net of income tax.

Adjusted return on MetLife, Inc.’s tangible common stockholders’ equity: adjusted earnings available to common shareholders, excluding amortization of VODA and VOCRA, net of income tax, divided by MetLife, Inc.’s average tangible common stockholders’ equity.

Allocated tangible equity: allocated equity reduced by the impact of goodwill, VODA and VOCRA, all net of income tax.

Adjusted return on allocated tangible equity: adjusted earnings available to common shareholders, excluding amortization of VODA and VOCRA, net of income tax, divided by allocated tangible equity.

The above measures are, when considered in conjunction with regulatory capital ratios, a measure of capital adequacy.

Expense ratio, direct expense ratio, adjusted expense ratio and related measures

Expense ratio: other expenses, net of capitalization of DAC, divided by premiums, fees and other revenues.

Direct expense ratio: adjusted direct expenses, divided by adjusted premiums, fees and other revenues.

Direct expense ratio, excluding total notable items related to direct expenses and PRT: adjusted direct expenses, excluding total notable items related to direct expenses, divided by adjusted premiums, fees and other revenues, excluding PRT.

Adjusted expense ratio: adjusted other expenses, net of adjusted capitalization of DAC, divided by adjusted premiums, fees and other revenues.

Adjusted expense ratio, excluding total notable items related to adjusted other expenses and PRT: adjusted other expenses, net of adjusted capitalization of DAC, excluding total notable items related to adjusted other expenses, divided by adjusted premiums, fees and other revenues, excluding PRT.

General account (GA) assets under management (GA AUM) and related measures

GA AUM is used by MetLife to describe assets in its GA investment portfolio which are actively managed and stated at estimated fair value. GA AUM is comprised of GA total investments and cash and cash equivalents, excluding policy loans, contractholder-directed equity securities, fair value option securities and certain other invested assets, as substantially all of these assets are not actively managed in MetLife’s GA investment portfolio. Mortgage loans (including commercial, agricultural and residential) and real estate and real estate joint ventures included in GA AUM (at net asset value, net of deduction for encumbering debt) have been adjusted from carrying value to estimated fair value. At the segment level, intersegment balances (intercompany activity, primarily related to investments in subsidiaries, that eliminate at the MetLife consolidated level) are excluded from GA AUM.

GA AUM (at amortized cost) excludes the following adjustments: (i) unrealized gain (loss) on investments carried at estimated fair value and (ii) adjustments from carrying value to estimated fair value on mortgage loans (including commercial, agricultural and residential) and real estate and real estate joint ventures. GA AUM (at amortized cost) is presented net of related allowance for credit loss.

Statistical sales information:

U.S.:

Group Benefits: calculated using 10% of single premium deposits and 100% of annualized full-year premiums and fees from recurring premium policy sales of all products.

Retirement and Income Solutions: calculated using 10% of single premium deposits and 100% of annualized full-year premiums and fees only from recurring premium policy sales of specialized benefit resources and corporate-owned life insurance.

Property & Casualty: calculated based on first year direct written premium, net of cancellation and endorsement activity.

Latin America, Asia and EMEA: calculated using 10% of single-premium deposits (mainly from retirement products such as variable annuity, fixed annuity and pensions), 20% of single-premium deposits from credit insurance and 100% of annualized full-year premiums and fees from recurring-premium policy sales of all products (mainly from risk and protection products such as individual life, accident & health and group).

Sales statistics do not correspond to revenues under GAAP, but are used as relevant measures of business activity.

The following additional information is relevant to an understanding of MetLife’s performance results and outlook:

Volume growth, as discussed in the context of business growth, is the period over period percentage change in adjusted earnings available to common shareholders attributable to adjusted premiums, fees and other revenues and assets under management levels, applying a model in which certain margins and factors are held constant. The most significant of such items are underwriting margins, investment margins, changes in equity market performance, expense margins and the impact of changes in foreign currency exchange rates.

MetLife uses a measure of free cash flow to facilitate an understanding of its ability to generate cash for reinvestment into its businesses or use in non-mandatory capital actions. MetLife defines free cash flow as the sum of cash available at MetLife’s holding companies from dividends from operating subsidiaries, expenses and other net flows of the holding companies (including capital contributions to subsidiaries), and net contributions from debt to be at or below target leverage ratios. This measure of free cash flow is prior to capital actions, such as common stock dividends and repurchases, debt reduction and mergers and acquisitions. Free cash flow should not be viewed as a substitute for net cash provided by (used in) operating activities calculated in accordance with GAAP. The free cash flow ratio is typically expressed as a percentage of annual adjusted earnings available to common shareholders.

Notable items reflect the unexpected impact of events that affect MetLife’s results, but that were unknown and that MetLife could not anticipate when it devised its business plan. Notable items also include certain items regardless of the extent anticipated in the business plan, to help investors have a better understanding of MetLife’s results and to evaluate and forecast those results. Notable items represent a positive (negative) impact to adjusted earnings available to common shareholders.

We refer to observable forward yield curves as of a particular date in connection with making our estimates for future results. The observable forward yield curves at a given time are based on implied future interest rates along a range of interest rate durations. This includes the 10-year U.S. Treasury rate which we use as a benchmark rate to describe longer-term interest rates used in our estimates for future results.

Forward-Looking Statements

This news release may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events and do not relate strictly to historical or current facts. They use words and terms such as “2022,” “accelerate,” “ahead,” “all of 2021,” “anticipate,” “assume,” “believe,” “commit,” “consistent,” “continue,” “estimate,” “expect,” “forward,” “future,” “growth,” “guidance,” “if,” “improvement,” “long-term,” “ongoing,” “on track,” “position,” “promise,” “Q3,” “record,” “remain,” “remainder of 2021,” “return,” “starting,” “strategy,” “target,” “trend,” “will,” “would,” and other words and terms of similar meaning or that are otherwise tied to future periods or future performance, in each case in all derivative forms. They include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, future sales efforts, future expenses, the outcome of contingencies such as legal proceedings, and future trends in operations and financial results.

Many factors determine the results of MetLife, Inc., its subsidiaries and affiliates, and they involve unpredictable risks and uncertainties. Our forward-looking statements depend on our assumptions, our expectations, and our understanding of the economic environment, but they may be inaccurate and may change. MetLife, Inc. does not guarantee any future performance. Our results could differ materially from those MetLife, Inc. expresses or implies in forward-looking statements. The risks, uncertainties and other factors identified in MetLife, Inc.’s filings with the U.S. Securities and Exchange Commission, and others, may cause such differences. These factors include:

(1)
economic condition difficulties, including risks relating to public health, interest rates, credit spreads, equity, real estate, obligors and counterparties, currency exchange rates, derivatives, and terrorism and security;

(2)
global capital and credit market adversity;

(3)
credit facility inaccessibility;

(4)
financial strength or credit ratings downgrades;

(5)
unavailability, unaffordability, or inadequate reinsurance;

(6)
statutory life insurance reserve financing costs or limited market capacity;

(7)
legal, regulatory, and supervisory and enforcement policy changes;

(8)
changes in tax rates, tax laws or interpretations;

(9)
litigation and regulatory investigations;

(10)
London Interbank Offered Rate termination and transition to alternative reference rates;

(11)
unsuccessful efforts to meet all environmental, social, and governance standards or to enhance our sustainability;

(12)
MetLife, Inc.’s inability to pay dividends and repurchase common stock;

(13)
MetLife, Inc.’s subsidiaries’ inability to pay it dividends;

(14)
investment defaults, downgrades, or volatility;

(15)
investment sales or lending difficulties;

(16)
collateral or derivative-related payments;

(17)
investment valuations, allowances, or impairments changes;

(18)
claims or other results that differ from our estimates, assumptions, or models;

(19)
global political, legal, or operational risks;

(20)
business competition;

(21)
technological change;

(22)
catastrophes;

(23)
climate changes or responses to it;

(24)
deficiencies in our closed block;

(25)
goodwill or other asset impairment, or deferred income tax asset allowance;

(26)
acceleration of amortization of DAC, deferred sales inducements, VOBA, or value of customer relationships acquired;

(27)
product guarantee volatility, costs, and counterparty risks;

(28)
risk management failures;

(29)
insufficient protection from operational risks;

(30)
confidential information protection or other cybersecurity or disaster recovery failures;

(31)
accounting standards changes;

(32)
excessive risk-taking;

(33)
marketing and distribution difficulties;

(34)
pension and other postretirement benefit assumption changes;

(35)
inability to protect our intellectual property or avoid infringement claims;

(36)
acquisition, integration, growth, disposition, or reorganization difficulties;

(37)
Brighthouse Financial, Inc. separation risks;

(38)
MetLife, Inc.’s Board of Directors influence over the outcome of stockholder votes through the voting provisions of the MetLife Policyholder Trust; and

(39)
legal- and corporate governance-related effects on business combinations.

MetLife, Inc. will not publicly correct or update any forward-looking statements if MetLife, Inc. believes it is not likely to achieve them or for any other reasons. Please consult any further disclosures MetLife, Inc. makes on related subjects in subsequent reports to the U.S. Securities and Exchange Commission.

MetLife, Inc.

GAAP Interim Condensed Consolidated Statements of Operations

(Unaudited)

(In millions)

For the Three Months Ended

June 30,

2021

2020

Revenues

Premiums

$

9,132

$

8,736

Universal life and investment-type product policy fees

1,422

1,299

Net investment income

5,280

4,087

Other revenues

664

456

Net investment gains (losses)

1,605

231

Net derivative gains (losses)

421

(710

)

Total revenues

18,524

14,099

Expenses

Policyholder benefits and claims

9,405

8,667

Interest credited to policyholder account balances

1,515

1,962

Policyholder dividends

236

290

Capitalization of DAC

(642

)

(671

)

Amortization of DAC and VOBA

537

560

Amortization of negative VOBA

(10

)

(10

)

Interest expense on debt

228

232

Other expenses

2,768

2,872

Total expenses

14,037

13,902

Income (loss) before provision for income tax

4,487

197

Provision for income tax expense (benefit)

1,075

47

Net income (loss)

3,412

150

Less: Net income (loss) attributable to noncontrolling interests

5

5

Net income (loss) attributable to MetLife, Inc.

3,407

145

Less: Preferred stock dividends

35

77

Preferred stock redemption premium

6

—

Net income (loss) available to MetLife, Inc.’s common shareholders

$

3,366

$

68

See footnotes on last page.

MetLife, Inc.

(Unaudited)

(In millions, except per share data)

For the Three Months Ended

June 30,

2021

2020

Reconciliation to Adjusted Earnings Available to Common Shareholders

Earnings Per

Weighted Average

Common Share Diluted (1)

Earnings Per

Weighted Average

Common Share Diluted (1)

Net income (loss) available to MetLife, Inc.’s common shareholders

$

3,366

$

3.83

$

68

$

0.07

Adjustments from net income (loss) available to common shareholders to adjusted earnings available to common shareholders:

Less: Net investment gains (losses)

1,605

1.82

231

0.25

Net derivative gains (losses)

421

0.48

(710

)

(0.78

)

Premiums

—

—

20

0.02

Universal life and investment-type product policy fees

36

0.04

31

0.03

Net investment income

163

0.19

643

0.71

Other revenues

60

0.07

39

0.04

Policyholder benefits and claims and policyholder dividends

(76

)

(0.09

)

(244

)

(0.27

)

Interest credited to policyholder account balances

(365

)

(0.40

)

(801

)

(0.87

)

Capitalization of DAC

—

—

2

—

Amortization of DAC and VOBA

3

—

8

0.01

Amortization of negative VOBA

—

—

—

—

Interest expense on debt

—

—

—

—

Other expenses

(68

)

(0.08

)

(55

)

(0.06

)

Goodwill impairment

—

—

—

—

Provision for income tax (expense) benefit

(491

)

(0.55

)

151

0.17

Add: Net income (loss) attributable to noncontrolling interests

5

0.01

5

0.01

Preferred stock redemption premium

6

0.01

—

—

Adjusted earnings available to common shareholders

2,089

2.37

758

0.83

Less: Total notable items (2)

66

0.08

—

—

Adjusted earnings available to common shareholders, excluding total notable items (2)

$

2,023

$

2.30

$

758

$

0.83

Adjusted earnings available to common shareholders on a constant currency basis

$

2,089

$

2.37

$

805

$

0.88

Adjusted earnings available to common shareholders, excluding total notable items, on a constant currency basis (2)

$

2,023

$

2.30

$

805

$

0.88

Weighted average common shares outstanding – diluted

879.7

913.1

See footnotes on last page.

MetLife, Inc.

(Unaudited)

(In millions)

For the Three Months Ended

June 30,

2021

2020

Premiums, Fees and Other Revenues

Premiums, fees and other revenues

$

11,218

$

10,491

Less: Unearned revenue adjustments

12

5

GMIB fees

24

25

Settlement of foreign currency earnings hedges

—

—

TSA fees

60

39

Divested businesses

—

21

Adjusted premiums, fees and other revenues

$

11,122

$

10,401

Adjusted premiums, fees and other revenues, on a constant currency basis

$

11,122

$

10,550

Less: Pension risk transfers (PRT) (3)

(14

)

(6

)

Adjusted premiums, fees and other revenues, excluding PRT, on a constant currency basis

$

11,136

$

10,556

Net Investment Income

Net investment income

$

5,280

$

4,087

Less: Investment hedge adjustments

(212

)

(188

)

Operating joint venture adjustments

—

—

Unit-linked contract income

378

818

Securitization entities income

—

—

Certain partnership distributions

(3

)

(1

)

Divested businesses

—

14

Adjusted net investment income

$

5,117

$

3,444

Revenues and Expenses

Total revenues

$

18,524

$

14,099

Less: Net investment gains (losses)

1,605

231

Less: Net derivative gains (losses)

421

(710

)

Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)

12

5

Less: Other adjustments to revenues:

GMIB fees

24

25

Investment hedge adjustments

(212

)

(188

)

Operating joint venture adjustments

—

—

Unit-linked contract income

378

818

Securitization entities income

—

—

Certain partnership distributions

(3

)

(1

)

Settlement of foreign currency earnings hedges

—

—

TSA fees

60

39

Divested businesses

—

35

Total adjusted revenues

$

16,239

$

13,845

Total expenses

$

14,037

$

13,902

Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)

9

(6

)

Less: Goodwill impairment

—

—

Less: Other adjustments to expenses:

PBC hedge adjustments

8

9

Inflation and pass-through adjustments

(18

)

106

GMIB costs and amortization of DAC and VOBA related to GMIB fees and GMIB costs

58

85

Market value adjustments and amortization of DAC, VOBA and negative VOBA related to market value adjustments

16

21

PAB hedge adjustments

(1

)

(2

)

Unit-linked contract costs

366

796

Securitization entities debt expense

—

—

Noncontrolling interest

(6

)

(7

)

Regulatory implementation costs

6

—

Acquisition, integration and other costs

4

—

TSA fees

60

39

Divested businesses

4

49

Total adjusted expenses

$

13,531

$

12,812

See footnotes on last page.

MetLife, Inc.

(Unaudited)

(In millions, except per share and ratio data)

For the Three Months Ended

June 30,

2021

2020

Expense Detail and Ratios

Reconciliation of Capitalization of DAC to Adjusted Capitalization of DAC

Capitalization of DAC

$

(642

)

$

(671

)

Less: Divested businesses

—

(2

)

Adjusted capitalization of DAC

$

(642

)

$

(669

)

Reconciliation of Other Expenses to Adjusted Other Expenses

Other expenses

$

2,768

$

2,872

Less: Noncontrolling interests

(6

)

(7

)

Less: Regulatory implementation costs

6

—

Less: Acquisition, integration and other costs

4

—

Less: TSA fees

60

39

Less: Divested businesses

4

23

Adjusted other expenses

$

2,700

$

2,817

Other Detail and Ratios

Other expenses

$

2,768

$

2,872

Capitalization of DAC

(642

)

(671

)

Other expenses, net of capitalization of DAC

$

2,126

$

2,201

Premiums, fees and other revenues

$

11,218

$

10,491

Expense ratio

19.0

%

21.0

%

Direct expenses

$

1,188

$

1,287

Less: Total notable items related to direct expenses (2)

(84

)

—

Direct expenses, excluding total notable items related to direct expenses (2)

$

1,272

$

1,287

Adjusted other expenses

$

2,700

$

2,817

Adjusted capitalization of DAC

(642

)

(669

)

Adjusted other expenses, net of adjusted capitalization of DAC

2,058

2,148

Less: Total notable items related to adjusted other expenses (2)

(84

)

—

Adjusted other expenses, net of adjusted capitalization of DAC, excluding total notable items related to adjusted other expenses (2)

$

2,142

$

2,148

Adjusted premiums, fees and other revenues

$

11,122

$

10,401

Less: PRT

(14

)

(6

)

Adjusted premiums, fees and other revenues, excluding PRT

$

11,136

$

10,407

Direct expense ratio

10.7

%

12.4

%

Direct expense ratio, excluding total notable items related to direct expenses and PRT (2)

11.4

%

12.4

%

Adjusted expense ratio

18.5

%

20.7

%

Adjusted expense ratio, excluding total notable items related to adjusted other expenses and PRT (2)

19.2

%

20.6

%

See footnotes on last page.

MetLife, Inc.

(Unaudited)

(In millions, except per share data)

June 30,

Equity Details

2021

2020

Total MetLife, Inc.’s stockholders’ equity

$

69,138

$

75,693

Less: Preferred stock

3,818

4,312

MetLife, Inc.’s common stockholders’ equity

65,320

71,381

Less: Net unrealized investment gains (losses), net of income tax

18,608

25,913

Defined benefit plans adjustment, net of income tax

(1,836

)

(1,968

)

Total MetLife, Inc.’s common stockholders’ equity, excluding AOCI other than FCTA

48,548

47,436

Less: Goodwill, net of income tax

9,398

8,910

VODA and VOCRA, net of income tax

779

264

Total MetLife, Inc.’s tangible common stockholders’ equity

$

38,371

$

38,262

June 30,

2021

2020

Total MetLife, Inc.’s common stockholders’ equity, excluding AOCI other than FCTA

$

48,548

$

47,436

Less: Accumulated year-to-date total notable items (2)

66

—

Total MetLife, Inc.’s common stockholders’ equity, excluding total notable items (excludes AOCI other than FCTA) (2)

48,482

47,436

Less: Goodwill, net of income tax

9,398

8,910

VODA and VOCRA, net of income tax

779

264

Total MetLife, Inc.’s tangible common stockholders’ equity, excluding total notable items (2)

$

38,305

$

38,262

June 30,

Book Value (4)

2021

2020

Book value per common share

$

75.86

$

78.65

Less: Net unrealized investment gains (losses), net of income tax

21.61

28.55

Defined benefit plans adjustment, net of income tax

(2.13

)

(2.17

)

Book value per common share, excluding AOCI other than FCTA

56.38

52.27

Less: Goodwill, net of income tax

10.92

9.82

VODA and VOCRA, net of income tax

0.90

0.29

Book value per common share – tangible common stockholders’ equity

$

44.56

$

42.16

Common shares outstanding, end of period (5)

861.1

907.6

For the Three Months Ended

June 30,

Average Common Stockholders’ Equity

2021

2020

Average common stockholders’ equity

$

63,436

$

68,645

Average common stockholders’ equity, excluding AOCI other than FCTA

$

47,618

$

47,481

Average common stockholders’ equity, excluding total notable items (excludes AOCI other than FCTA) (2)

$

47,585

$

47,481

Average tangible common stockholders’ equity

$

37,341

$

38,342

Average tangible common stockholders’ equity, excluding total notable items (2)

$

37,308

$

38,342

See footnotes on last page.

MetLife, Inc.

(Unaudited)

For the Three Months Ended

June 30, (6)

2021

2020

Return on Equity

Return on MetLife, Inc.’s:

Common stockholders’ equity

21.2

%

0.4

%

Adjusted return on MetLife, Inc.’s:

Common stockholders’ equity

13.2

%

4.4

%

Common stockholders’ equity, excluding AOCI other than FCTA

17.5

%

6.4

%

Common stockholders’ equity, excluding total notable items (excludes AOCI other than FCTA) (2)

17.0

%

6.4

%

Tangible common stockholders’ equity (7)

22.6

%

8.0

%

Tangible common stockholders’ equity, excluding total notable items (2), (7)

21.9

%

8.0

%

Adjusted Return on Allocated Equity:

U.S.

38.7

%

18.9

%

Asia

14.2

%

7.2

%

Latin America

14.1

%

17.2

%

EMEA

13.2

%

16.3

%

MetLife Holdings

20.6

%

0.8

%

Adjusted Return on Allocated Tangible Equity:

U.S.

45.1

%

21.8

%

Asia

21.3

%

10.9

%

Latin America

22.1

%

28.1

%

EMEA

22.6

%

28.6

%

MetLife Holdings

22.5

%

1.1

%

See footnotes on last page.

MetLife, Inc.

Adjusted Earnings Available to Common Shareholders

(Unaudited)

(In millions)

For the Three Months Ended

June 30,

2021

2020

U.S. (3), (8):

Adjusted earnings available to common shareholders

$

902

$

523

Less: Total notable items (2)

—

—

Adjusted earnings available to common shareholders, excluding total notable items (2)

$

902

$

523

Adjusted premiums, fees and other revenues

$

6,136

$

5,692

Less: PRT

(14

)

(6

)

Adjusted premiums, fees and other revenues, excluding PRT

$

6,150

$

5,698

Group Benefits (3):

Adjusted earnings available to common shareholders

$

248

$

248

Less: Total notable items (2)

—

—

Adjusted earnings available to common shareholders, excluding total notable items (2)

$

248

$

248

Adjusted premiums, fees and other revenues

$

5,599

$

4,346

Retirement & Income Solutions (3):

Adjusted earnings available to common shareholders

$

654

$

192

Less: Total notable items (2)

—

—

Adjusted earnings available to common shareholders, excluding total notable items (2)

$

654

$

192

Adjusted premiums, fees and other revenues

$

537

$

511

Less: PRT

(14

)

(6

)

Adjusted premiums, fees and other revenues, excluding PRT

$

551

$

517

Property & Casualty (3), (8):

Adjusted earnings available to common shareholders

$

—

$

83

Less: Total notable items (2)

—

—

Adjusted earnings available to common shareholders, excluding total notable items (2)

$

—

$

83

Adjusted premiums, fees and other revenues

$

—

$

835

See footnotes on last page.

MetLife, Inc.

Adjusted Earnings Available to Common Shareholders (Continued)

(Unaudited)

(In millions)

For the Three Months Ended

June 30,

2021

2020

Asia:

Adjusted earnings available to common shareholders

$

520

$

256

Less: Total notable items (2)

—

—

Adjusted earnings available to common shareholders, excluding total notable items (2)

$

520

$

256

Adjusted earnings available to common shareholders on a constant currency basis

$

520

$

272

Adjusted earnings available to common shareholders, excluding total notable items, on a constant currency basis (2)

$

520

$

272

Adjusted premiums, fees and other revenues

$

2,037

$

2,018

Adjusted premiums, fees and other revenues, on a constant currency basis

$

2,037

$

2,040

Latin America:

Adjusted earnings available to common shareholders

$

97

$

132

Less: Total notable items (2)

—

—

Adjusted earnings available to common shareholders, excluding total notable items (2)

$

97

$

132

Adjusted earnings available to common shareholders on a constant currency basis

$

97

$

157

Adjusted earnings available to common shareholders, excluding total notable items, on a constant currency basis (2)

$

97

$

157

Adjusted premiums, fees and other revenues

$

934

$

737

Adjusted premiums, fees and other revenues, on a constant currency basis

$

934

$

834

EMEA:

Adjusted earnings available to common shareholders

$

94

$

116

Less: Total notable items (2)

—

—

Adjusted earnings available to common shareholders, excluding total notable items (2)

$

94

$

116

Adjusted earnings available to common shareholders on a constant currency basis

$

94

$

122

Adjusted earnings available to common shareholders, excluding total notable items, on a constant currency basis (2)

$

94

$

122

Adjusted premiums, fees and other revenues

$

744

$

660

Adjusted premiums, fees and other revenues, on a constant currency basis

$

744

$

690

MetLife Holdings (3):

Adjusted earnings available to common shareholders

$

536

$

20

Less: Total notable items (2)

—

—

Adjusted earnings available to common shareholders, excluding total notable items (2)

$

536

$

20

Adjusted premiums, fees and other revenues

$

1,181

$

1,208

Corporate & Other (3):

Adjusted earnings available to common shareholders

$

(60

)

$

(289

)

Less: Total notable items (2)

66

—

Adjusted earnings available to common shareholders, excluding total notable items (2)

$

(126

)

$

(289

)

Adjusted premiums, fees and other revenues

$

90

$

86

See footnotes on last page.

MetLife, Inc.

(Unaudited)

(In millions)

For the Three Months Ended

June 30,

2021

2020

Variable investment income (post-tax, in millions)

U.S.

Group Benefits

$

14

$

3

Retirement and Income Solutions

351

(122)

Property & Casualty (8)

—

(9)

Total U.S.

365

(128)

Asia

218

(77)

Latin America

22

(7)

EMEA

—

—

MetLife Holdings

301

(161)

Corporate & Other

44

(65)

Total variable investment income

$

950

$

(438)

See footnotes on last page.

MetLife, Inc.

(Unaudited)

Cash & Capital (9), (10)

(In billions)

June 30

2021

2020

Holding Companies Cash & Liquid Assets

$

6.5

$

6.6

Group Benefits Underwriting (11)

For the Three Months Ended

June 30,

2021

2020

Group Life Mortality Ratio (12)

94.3

%

95.9

%

Footnotes

(1

)

Adjusted earnings available to common shareholders, excluding total notable items, per diluted common share is calculated on a standalone basis and may not equal (i) adjusted earnings available to common shareholders per diluted common share, less (ii) total notable items per diluted common share.

(2

)

Notable items reflect the unexpected impact of events that affect MetLife’s results, but that were unknown and that MetLife could not have anticipated when it devised its business plan. Notable items also include certain items regardless of the extent anticipated in the business plan, to help investors have a better understanding of MetLife’s results and to evaluate and forecast those results. Notable items can affect MetLife’s results either positively or negatively.

(3

)

Results on a constant currency basis are not included as constant currency impact is not significant.

(4

)

Book values exclude $3,818 million and $4,312 million of equity related to preferred stock at June 30, 2021 and 2020, respectively.

(5

)

There were share repurchases of $1.1 billion for the three months ended June 30, 2021.

(6

)

Annualized using quarter-to-date results.

(7

)

Adjusted earnings available to common shareholders, used to calculate the adjusted return on tangible common stockholders’ equity, excludes the impact of amortization of VODA and VOCRA, net of income tax, for the three months ended June 30, 2021 and 2020 of $20 million and $10 million, respectively.

(8

)

For the three months ended June 30, 2021, U.S. results exclude Property & Casualty as MetLife completed the sale of the business. U.S. results for the three months ended June 30, 2020, include Property & Casualty.

(9

)

The total U.S. statutory adjusted capital is expected to be approximately $18.5 billion at June 30, 2021, up 9% from December 31, 2020. This balance includes MetLife, Inc.’s principal U.S. insurance subsidiaries, excluding American Life Insurance Company. Property & Casualty is excluded for both periods.

(10

)

As of March 31, 2021, the solvency margin ratio of MetLife’s insurance subsidiary in Japan was 873%, which is calculated quarterly and does not reflect conditions and factors occurring after March 31, 2021.

(11

)

Results are derived from insurance and non-administrative services-only contracts.

(12

)

Excludes certain experience-rated contracts and includes accidental death and dismemberment. For the three months ended June 30, 2021 there was an estimated (7.2) percentage point impact to the ratio due to excess mortality with an estimated impact to adjusted earnings of ($115) million. Of this impact, an estimated (4.5) percentage points was due to COVID-19 with an estimated impact to adjusted earnings of ($75) million.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210804006075/en/

For Media: Randy Clerihue (646) 552-0533

For Investors: John Hall (212) 578-7888

KEYWORDS: United States North America New York

INDUSTRY KEYWORDS: Finance Banking Professional Services Other Professional Services Insurance

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Posted on August 4, 2021 4:19 pm
Ares Management Corporation to Host Investor Day

Ares Management Corporation to Host Investor Day

Event to Take Place on August 12, 2021

LOS ANGELES–(BUSINESS WIRE)–
Ares Management Corporation (NYSE: ARES) will host an Investor Day on Thursday, August 12, 2021 via live video stream. During the event, members of Ares’ senior leadership team will provide an update on the firm’s businesses, growth strategy and future outlook. Prepared presentations will begin at 8:00 a.m. (Eastern Time) followed by a Q&A session.

To register for the event and to access to the live video stream, please visit the Investor Resources section of the Company’s website at www.ares-ir.com. For those unable to attend the live stream event, a replay and the Investor Day presentation slides will be made available on the Investor Resources section of the Company’s website.

About Ares Management Corporation

Ares Management Corporation (NYSE: ARES) is a leading global alternative investment manager offering clients complementary primary and secondary investment solutions across the credit, private equity, real estate and infrastructure asset classes. We seek to provide flexible capital to support businesses and create value for our stakeholders and within our communities. By collaborating across our investment groups, we aim to generate consistent and attractive investment returns throughout market cycles. As of June 30, 2021, including the acquisition of Black Creek Group, which closed July 1, 2021, Ares Management’s global platform had approximately $262 billion of assets under management with approximately 2,000 employees operating across North America, Europe, Asia Pacific and the Middle East. For more information, please visit www.aresmgmt.com. Follow Ares on Twitter @Ares_Management.

Forward-Looking Statements

Statements included herein or made during the Investor Day may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future events or our future performance or financial condition. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in our filings with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which it is made. Ares Management Corporation undertakes no duty to update any forward-looking statements made herein or during the Investor Day webcast, whether as a result of new information, future developments or otherwise, except as required by law.

Nothing in this press release constitutes an offer to sell or solicitation of an offer to buy any securities of Ares or an investment fund managed by Ares or its affiliates.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210804006066/en/

Investors:

Carl Drake, 888-818-5298

[email protected]

or

Greg Mason, 314-282-2533

[email protected]

Media:

Ares Management Corporation

Priscila Roney, 212-808-1185

[email protected]

or

Brittany Cash, 212-301-0347

[email protected]

Mendel Communications

Bill Mendel, 212-397-1030

[email protected]

KEYWORDS: United States North America California

INDUSTRY KEYWORDS: Finance Consulting Banking Professional Services Other Professional Services

MEDIA:

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Posted on August 4, 2021 4:19 pm
MetLife CFO John McCallion Provides Second Quarter 2021 Financial Update Video

MetLife CFO John McCallion Provides Second Quarter 2021 Financial Update Video

NEW YORK–(BUSINESS WIRE)–
MetLife, Inc. (NYSE: MET) today announced that Executive Vice President and Chief Financial Officer John McCallion has provided a second quarter 2021 financial update video.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20210804006061/en/

The video can be viewed on the company’s website at https://www.metlife.com/about-us/newsroom/#video.

About MetLife

MetLife, Inc. (NYSE: MET), through its subsidiaries and affiliates (“MetLife”), is one of the world’s leading financial services companies, providing insurance, annuities, employee benefits and asset management to help its individual and institutional customers navigate their changing world. Founded in 1868, MetLife has operations in more than 40 markets globally and holds leading positions in the United States, Japan, Latin America, Asia, Europe and the Middle East. For more information, visit www.metlife.com.

Forward-Looking Statements

This news release may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events and do not relate strictly to historical or current facts. They use words and terms such as “buying back,” “continue,” “creating,” “delivering,” “growth,” “investing,” “lingering,” “long-term,” “momentum,” “ongoing,” “target,” and other words and terms of similar meaning or that are otherwise tied to future periods or future performance, in each case in all derivative forms. They include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, future sales efforts, future expenses, the outcome of contingencies such as legal proceedings, and future trends in operations and financial results.

Many factors determine the results of MetLife, Inc., its subsidiaries and affiliates, and they involve unpredictable risks and uncertainties. Our forward-looking statements depend on our assumptions, our expectations, and our understanding of the economic environment, but they may be inaccurate and may change. MetLife, Inc. does not guarantee any future performance. Our results could differ materially from those MetLife, Inc. expresses or implies in forward-looking statements. The risks, uncertainties and other factors identified in MetLife, Inc.’s filings with the U.S. Securities and Exchange Commission, and others, may cause such differences. These factors include:

(1)

economic condition difficulties, including risks relating to public health, interest rates, credit spreads, equity, real estate, obligors and counterparties, currency exchange rates, derivatives, and terrorism and security;

(2)

global capital and credit market adversity;

(3)

credit facility inaccessibility;

(4)

financial strength or credit ratings downgrades;

(5)

unavailability, unaffordability, or inadequate reinsurance;

(6)

statutory life insurance reserve financing costs or limited market capacity;

(7)

legal, regulatory, and supervisory and enforcement policy changes;

(8)

changes in tax rates, tax laws or interpretations;

(9)

litigation and regulatory investigations;

(10)

London Interbank Offered Rate termination and transition to alternative reference rates;

(11)

unsuccessful efforts to meet all environmental, social, and governance standards or to enhance our sustainability;

(12)

MetLife, Inc.’s inability to pay dividends and repurchase common stock;

(13)

MetLife, Inc.’s subsidiaries’ inability to pay it dividends;

(14)

investment defaults, downgrades, or volatility;

(15)

investment sales or lending difficulties;

(16)

collateral or derivative-related payments;

(17)

investment valuations, allowances, or impairments changes;

(18)

claims or other results that differ from our estimates, assumptions, or models;

(19)

global political, legal, or operational risks;

(20)

business competition;

(21)

technological change;

(22)

catastrophes;

(23)

climate changes or responses to it;

(24)

deficiencies in our closed block;

(25)

goodwill or other asset impairment, or deferred income tax asset allowance;

(26)

acceleration of amortization of deferred policy acquisition costs, deferred sales inducements, value of business acquired, or value of customer relationships acquired;

(27)

product guarantee volatility, costs, and counterparty risks;

(28)

risk management failures;

(29)

insufficient protection from operational risks;

(30)

confidential information protection or other cybersecurity or disaster recovery failures;

(31)

accounting standards changes;

(32)

excessive risk-taking;

(33)

marketing and distribution difficulties;

(34)

pension and other postretirement benefit assumption changes;

(35)

inability to protect our intellectual property or avoid infringement claims;

(36)

acquisition, integration, growth, disposition, or reorganization difficulties;

(37)

Brighthouse Financial, Inc. separation risks;

(38)

MetLife, Inc.’s Board of Directors influence over the outcome of stockholder votes through the voting provisions of the MetLife Policyholder Trust; and

(39)

legal- and corporate governance-related effects on business combinations.

MetLife, Inc. will not publicly correct or update any forward-looking statements if MetLife, Inc. believes it is not likely to achieve them or for any other reasons. Please consult any further disclosures MetLife, Inc. makes on related subjects in subsequent reports to the U.S. Securities and Exchange Commission.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210804006061/en/

For Media:

Randy Clerihue

(646) 552-0533

[email protected]

For Investors:

John Hall

(212) 578-7888

[email protected]

KEYWORDS: United States North America New York

INDUSTRY KEYWORDS: Professional Services Insurance Finance

MEDIA:

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Posted on August 4, 2021 4:19 pm
Rent-A-Center, Inc. Reports Second Quarter 2021 Results

Rent-A-Center, Inc. Reports Second Quarter 2021 Results

Total Revenues of $1.2 billion, up 21.6% Pro Forma¹

Acima Segment GMV of $522 million up 43% Pro Forma¹

Rent-A-Center Segment Same-Store-Sales up 16.6% led by E-commerce

Diluted EPS of $0.90; Non-GAAP Diluted EPS of $1.63

Raises 2021 Guidance and Announces $250 million Share Repurchase Authorization

PLANO, Texas–(BUSINESS WIRE)–
Rent-A-Center, Inc. (the “Company” or “Rent-A-Center”) (NASDAQ/NGS: RCII) today announced results for the quarter ended June 30, 2021.

“Our business once again delivered outstanding performance in the second quarter as our omni-channel strategy has positioned us as a leading provider of lease-to-own solutions for consumers, which we believe is one of the most under-penetrated and dynamic sectors in the Payments and Fintech space,” said Mitch Fadel, Chief Executive Officer. “Today’s consumers are increasingly seeking shopping options that are flexible, convenient, and offer low financial risk. Rent-A-Center has the capabilities to meet these needs through its Acima virtual LTO platform and its highly trusted and convenient Rent-A-Center omni-channel solution.”

“The integration of Acima, which we acquired during the first quarter this year, is on track with our plans, and after the first full quarter owning the business, we are even more enthusiastic about the significant strategic value and growth opportunities. Earlier this week, we issued a press release highlighting some proprietary, groundbreaking Fintech innovations for the Acima Ecosystem, including the Acima Mobile Application, Acima Marketplace^TM, Acima Browser Extension, and the Acima LeasePay Card, that we believe could potentially double Acima’s total addressable market to a size approaching $100 billion. At the same time, our Rent-A-Center Business continues to perform exceptionally well, with mid-teens same-store-sales, generating highly profitable growth and a compelling evolving e-commerce platform.”

“Given our strong performance year-to-date and favorable underlying fundamental trends, we increased our 2021 guidance. In addition, considering the long-term value creation potential of our company, strong financial position, and solid cash flow generation, our Board of Directors has authorized a new $250 million share repurchase program,” concluded Mr. Fadel.

Second Quarter Consolidated Results

Second quarter 2021 consolidated revenues of $1.2 billion increased 74.6% year-over-year, primarily due to the acquisition of Acima Holdings, LLC (the “Acima Acquisition”), which closed in the first quarter of 2021; on a pro-forma¹ basis revenues grew 21.6% led by strong organic growth in the Acima and Rent-A-Center Business segments.

GAAP operating profit for the second quarter of 2021 was $106.5 million compared to $53.6 million in the prior year period, with growth primarily due to the Acima Acquisition and strong profitability in the Rent-A-Center Business Segment, partially offset by Acima Acquisition related costs, as described further below.

GAAP net income for the second quarter of 2021 was $61.3 million compared to $38.5 million in the prior year period. GAAP net income for the second quarter of 2021 included $49.3 million of costs, net of tax, relating to special items compared to $5.6 million in the prior year period.

GAAP earnings per share for the second quarter of 2021 was $0.90 compared to $0.70 in the prior year period. Adjusted earnings per share, which exclude the impact of special items described below, for the second quarter of 2021 was $1.63 compared to $0.80 in the prior year period.

Adjusted EBITDA in the second quarter of 2021 was $181.9 million and increased 41% year-over-year on a pro-forma basis¹, led by solid growth and strong profitability in both the Rent-A-Center Business and Acima segments. Adjusted EBITDA margin was 15.2% in the second quarter of 2021 compared to 13.1% in the prior year period on a pro-forma¹ basis.

For the six months ended June 30, 2021, the Company generated $250.5 million of cash from operations, and ended the second quarter of 2021 with $145.1 million of cash and cash equivalents, $1.32 billion of debt outstanding, $608 million of liquidity including $463 million of undrawn revolving credit, and a pro-forma net debt to Adjusted EBITDA ratio of 1.7 times.

The Board of Directors has authorized a new share repurchase program for up to $250 million of the Company’s common stock, replacing the Company’s previous share repurchase program. Share repurchases are subject to the Company’s discretion based on various factors, and may be made in the open market or privately negotiated transactions. The Company is not obligated to acquire any shares, and the Board of Directors may modify, extend or terminate the program at any time.

Second Quarter Segment Highlights

Acima Segment:Second quarter 2021 revenues of $635.3 million increased 232.2% year-over-year with GMV (Gross Merchandise Volume) growth of 309.3%, primarily due to the Acima Acquisition. On a pro-forma¹ basis, revenues increased 29.7% and GMV increased 43% year-over-year led by new virtual retail partner additions, organic growth in existing retail partnerships, higher e-commerce penetration, and cycling over softer GMV trends in the prior year related to the effect of the COVID-19 pandemic on retail partners. Skip/stolen losses were 8.7% of revenue in the second quarter of 2021 compared to 18.4% in the prior year period, partially due to $5.6 million of additional loss reserves taken in the prior-year period related to COVID-19. On a GAAP basis, segment operating profit was $68.1 million with operating profit margin of 10.7% in the second quarter of 2021, compared to $6.2 million and 3.3% in the prior year period. Adjusted EBITDA was $87.3 million with Adjusted EBITDA margin of 13.7% in the second quarter of 2021, compared to $60.0 million and 12.3% in the prior year period on a pro-forma¹basis.

Rent-A-Center Business Segment:Second quarter 2021 revenues of $505.8 million increased 10.2% year-over-year, primarily due to a 16.6% increase in same store sales revenue that benefited from 19% growth in e-commerce sales, strong lease portfolio performance, and favorable customer payment trends, partially offset by the impact of refranchising approximately 100 stores in California in the fourth quarter of 2020. Skip/stolen losses were 2.3% of revenue in the second quarter of 2021 compared to 3.7% in the prior year period, benefiting from operational initiatives including centralized decisioning and expansion of electronic payments. On a GAAP basis, segment operating profit was $126.5 million with operating profit margin of 25.0% in the second quarter of 2021, compared to $85.1 million and 18.5% in the prior year period. Adjusted EBITDA was $131.1 million and increased $39.3 million year-over-year. Adjusted EBITDA margin was 25.9% in the second quarter of 2021 compared to 20.0% in the prior year period. Both the segment operating profit and Adjusted EBITDA increases were driven primarily by higher revenues and lower skip/stolen losses partially offset by higher labor expense. At June 30, 2021, the Rent-A-Center Business segment had 1,841 company-operated locations.

Franchising Segment:Second quarter 2021 revenues of $37.6 million increased 65.7% year-over-year, primarily due to higher store count, as a result of refranchising approximately 100 California stores during 2020 and higher inventory purchases by franchisees. On a GAAP basis, segment operating profit was $5.7 million in the second quarter and increased $2.7 million year-over-year. Adjusted EBITDA was $5.7 million and increased $2.7 million year-over-year. At June 30, 2021, there were 461 franchise-operated locations.

Mexico Segment:Second quarter 2021 revenues of $15.3 million increased 23.6% year-over-year on a constant currency basis. On a GAAP basis, segment operating profit was $2.4 million in the second quarter and increased $1.4 million year-over-year. Adjusted EBITDA was $2.5 million and increased $1.4 million year-over-year. At June 30, 2021, the Mexico business had 121 company-operated locations.

Corporate Segment:Second quarter 2021 expenses increased $17.4 million year-over-year, or approximately 48.5%, primarily due to investment in talent related to the Company’s Fintech initiatives, higher incentive compensation, cycling over the impact of a furlough and other cost savings measures taken in response to COVID-19 in the second quarter of 2020, and stock compensation expense associated with the Acima Acquisition.

Key Operating Metrics

Gross Merchandise Volume (GMV): The Company defines Gross Merchandise Volume as the retail value in U.S. dollars of merchandise acquired by the Company that is leased to customers through a transaction that occurs within a defined period, net of cancellations. The Company has transitioned from using Invoice Volume to GMV as a key metric to better reflect the increasing digital nature of its business as a result of the Acima Acquisition.

1) The disclosed pro forma results and metrics in this release and the Company’s related earnings conference call represent estimated financial results and metrics as if the acquisition of Acima had been completed on January 1, 2020. The pro forma results and metrics may not necessarily reflect the actual results of operations or metrics that would have been achieved had the acquisition been completed on January 1, 2021, nor are they necessarily indicative of future results of operations or metrics.

SAME STORE SALES

(Unaudited)

Table 1

Period

Rent-A-Center

Business

Mexico

Three Months Ended June 30, 2021 ⁽¹⁾

16.6

%

21.6

%

Three Months Ended March 31, 2021 ⁽¹⁾

23.4

%

9.6

%

Three Months Ended June 30, 2020⁽¹⁾

7.8

%

(2.6)

%

Note: Same store sale methodology – Same store sales generally represents revenue earned in stores that were operated by us for 13 months or more and are reported on a constant currency basis as a percentage of total revenue earned in stores of the segment during the indicated period. The Company excludes from the same store sales base any store that receives a certain level of customer accounts from closed stores or acquisitions. The receiving store will be eligible for inclusion in the same store sales base in the 30^th full month following account transfer.

⁽¹⁾ Due to the COVID-19 pandemic and related temporary store closures, all 32 stores in Puerto Rico were excluded starting in March 2020 and will remain excluded for 18 months.

2021 Guidance

The Company is increasing full year guidance.

Consolidated ⁽¹⁾

Revenues of $4.550 to $4.670 billion

Adjusted EBITDA of $660 to $700 million⁽²⁾

Non-GAAP diluted earnings per share of $5.90 to $6.40^{(2) (4)}

Free cash flow of $300 to $350 million⁽²⁾

Acima Segment ⁽³⁾

Revenues of $2.340 to $2.420 billion

Adjusted EBITDA of $330 to $350 million⁽²⁾

Rent-A-Center Business Segment

Revenues of $2.020 to $2.060 billion

Adjusted EBITDA of $480 to $500 million⁽²⁾

(1) Consolidated includes Acima, Rent-A-Center Business, Franchising, Mexico and Corporate Segments.

(2) Non-GAAP financial measure. See descriptions below in this release. Because of the inherent uncertainty related to the special items identified in the tables below, management does not believe it is able to provide a meaningful forecast of the comparable GAAP measures or reconciliation to any forecasted GAAP measure without unreasonable effort.

(3) Acima Segment refers to the historical Preferred Lease Segment and newly acquired Acima business as of the acquisition date.

(4) Non-GAAP diluted earnings per share excludes the impact of incremental depreciation and amortization related to the estimated fair value of acquired Acima assets, stock compensation expense associated with the Acima Acquisition equity consideration subject to vesting conditions, and one-time transaction and integration costs related to the Acima Acquisition. Guidance excludes the impact of future share repurchases.

Webcast Information

Rent-A-Center, Inc. will host a conference call to discuss the second quarter results, guidance and other operational matters on the morning of Thursday, August 5, 2021, at 8:30 a.m. ET. For a live webcast of the call, visit https://investor.rentacenter.com. Certain financial and other statistical information that will be discussed during the conference call will also be provided on the same website. Residents of the United States and Canada can listen to the call by dialing (800) 399-0012. International participants can access the call by dialing (404) 665-9632.

About Rent-A-Center, Inc.

Rent-A-Center, Inc. (NASDAQ: RCII) is a leading provider of technology driven, flexible, no debt obligation leasing solutions that offer underserved consumers access to and potential ownership of high-quality durable goods that enhance the quality of life. The Company’s omni-channel model utilizes proprietary data and technology to facilitate transactions across a wide range of retail channels including its own Acima virtual lease-to-own platform, Rentacenter.com, e-commerce partner platforms, partner retail stores, and Rent-A-Center branded stores. For additional information about the Company, please visit our website Rentacenter.com or Investor.rentacenter.com.

Forward Looking Statements

This press release and the guidance above and the Company’s related conference call contain forward-looking statements that involve risks and uncertainties. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “could,” “estimate,” “predict,” “continue,” “maintain,” “should,” “anticipate,” “believe,” or “confident,” or the negative thereof or variations thereon or similar terminology and including, among others, statements concerning (i) the Company’s guidance for 2021 and future outlook, (ii) the potential effects of the pandemic of the respiratory disease caused by a novel coronavirus (“COVID-19”) on the Company’s business operations, financial performance, and prospects, (iii) the future business prospects and financial performance of our Company following the closing of the Company’s acquisition of Acima Holdings, LLC (“Acima Holdings”), (iv) cost and revenue synergies and other benefits expected to result from the Acima Holdings acquisition, (v) planned technologies and other enhancements to the Company’s lease-to-own solutions for consumers and retailers, (vi) the Company’s expectations, plans and strategy relating to its capital structure and capital allocation, including any share repurchases under the Company’s share repurchase program, and (vii) other statements regarding the Company’s strategy and plans and other statements that are not historical facts. However, there can be no assurance that such expectations will occur. The Company’s actual future performance could differ materially and adversely from such statements. Factors that could cause or contribute to these differences include, but are not limited to: (1) risks relating to the Acima Acquisition, including (i) the possibility that the anticipated benefits from the Acima Holdings acquisition may not be fully realized or may take longer to realize than expected, (ii) the possibility that costs, difficulties or disruptions related to the integration of Acima Holdings operations into the Company’s other operations will be greater than expected, (iii) the Company’s ability to (A) effectively adjust to changes in the composition of the Company’s offerings and product mix as a result of acquiring Acima Holdings and continue to maintain the quality of existing offerings and (B) successfully introduce other new product or service offerings on a timely and cost-effective basis, and (iv) changes in the Company’s future cash requirements as a result of the Acima Holdings acquisition, whether caused by unanticipated increases in capital expenditures or working capital needs, unanticipated liabilities or otherwise; (2) the Company’s ability to identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies; (3) the impact of the COVID-19 pandemic and related government and regulatory restrictions issued to combat the pandemic, including adverse changes in such restrictions, and impacts on (i) demand for the Company’s lease-to-own products offered in the Company’s operating segments, (ii) the Company’s Acima retail partners, (iii) the Company’s customers and their willingness and ability to satisfy their lease obligations, (iv) the Company’s suppliers’ ability to satisfy its merchandise needs, (v) the Company’s employees, including the ability to adequately staff its operating locations, (vi) the Company’s financial and operational performance, and (vii) the Company’s liquidity; (4) the general strength of the economy and other economic conditions affecting consumer preferences and spending, including the availability of credit to the Company’s target consumers; (5) factors affecting the disposable income available to the Company’s current and potential customers; (6) changes in the unemployment rate; (7) capital market conditions, including availability of funding sources for the Company; (8) changes in the Company’s credit ratings; (9) difficulties encountered in improving the financial and operational performance of the Company’s business segments; (10) risks associated with pricing changes and strategies being deployed in the Company’s businesses; (11) the Company’s ability to continue to realize benefits from its initiatives regarding cost-savings and other EBITDA enhancements, efficiencies and working capital improvements; (12) the Company’s ability to continue to effectively execute its strategic initiatives, including mitigating risks associated with any potential mergers and acquisitions, or re-franchising opportunities; (13) failure to manage the Company’s store labor and other store expenses, including merchandise losses; (14) disruptions caused by the operation of the Company’s store information management systems; (15) risks related to the Company’s virtual lease-to-own business, including the Company’s ability to continue to develop and successfully implement the necessary technologies; (16) the Company’s ability to achieve the benefits expected from its integrated virtual and staffed retail partner offering and to successfully grow this business segment; (17) exposure to potential operating margin degradation due to the higher cost of merchandise in the Company’s Acima offering and potential for higher merchandise losses; (18) the Company’s transition to more-readily scalable, “cloud-based” solutions; (19) the Company’s ability to develop and successfully implement digital or E-commerce capabilities, including mobile applications; (20) the Company’s ability to protect its proprietary intellectual property; (21) disruptions in the Company’s supply chain; (22) limitations of, or disruptions in, the Company’s distribution network; (23) rapid inflation or deflation in the prices of the Company’s products; (24) the Company’s ability to execute and the effectiveness of store consolidations, including the Company’s ability to retain the revenue from customer accounts merged into another store location as a result of a store consolidation; (25) the Company’s available cash flow and its ability to generate sufficient cash flow to continue paying dividends; (26) increased competition from traditional competitors, virtual lease-to-own competitors, online retailers, Fintech companies and other competitors, including subprime lenders; (27) the Company’s ability to identify and successfully market products and services that appeal to its current and future targeted customer segments and to accurately estimate the size of the total addressable market; (28) consumer preferences and perceptions of the Company’s brands; (29) the Company’s ability to retain the revenue associated with acquired customer accounts and enhance the performance of acquired stores; (30) the Company’s ability to enter into new, and collect on, its rental or lease purchase agreements; (31) changes in the enforcement of existing laws and regulations and the enactment of new laws and regulations adversely affecting the Company’s business, including any legislative or regulatory enforcement efforts that seek to re-characterize store-based or virtual lease-to-own transactions as credit sales and to apply consumer credit laws and regulations to the Company’s business; (32) the Company’s compliance with applicable statutes or regulations governing its businesses; (33) the impact of any additional social unrest such as that experienced in 2020 or otherwise, and resulting damage to the Company’s inventory or other assets and potential lost revenues; (34) changes in interest rates; (35) changes in tariff policies; (36) adverse changes in the economic conditions of the industries, countries or markets that the Company serves; (37) information technology and data security costs; (38) the impact of any breaches in data security or other disturbances to the Company’s information technology and other networks and the Company’s ability to protect the integrity and security of individually identifiable data of its customers, employees and retail partners; (39) changes in estimates relating to self-insurance liabilities and income tax and litigation reserves; (40) changes in the Company’s effective tax rate; (41) fluctuations in foreign currency exchange rates; (42) the Company’s ability to maintain an effective system of internal controls, including in connection with the integration of Acima; (43) litigation or administrative proceedings to which the Company is or may be a party to from time to time; and (44) the other risks detailed from time to time in the Company’s SEC reports, including but not limited to, its Annual Report on Form 10-K for the year ended December 31, 2020 and in its subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except as required by law, the Company is not obligated to publicly release any revisions to these forward-looking statements to reflect the events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Rent-A-Center, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS – UNAUDITED

Table 2

Three Months Ended June 30,

(In thousands, except per share data)

2021

2020

Revenues

Store

Rentals and fees

$

916,405

$

534,737

Merchandise sales

221,229

108,080

Installment sales

18,191

17,643

Other

1,035

775

Total store revenues

1,156,860

661,235

Franchise

Merchandise sales

29,616

18,047

Royalty income and fees

7,499

4,464

Total revenues

1,193,975

683,746

Cost of revenues

Store

Cost of rentals and fees

320,873

157,124

Cost of merchandise sold

249,853

102,960

Cost of installment sales

6,234

6,092

Total cost of store revenues

576,960

266,176

Franchise cost of merchandise sold

29,543

18,038

Total cost of revenues

606,503

284,214

Gross profit

587,472

399,532

Operating expenses

Store expenses

Labor

159,337

129,929

Other store expenses

181,012

160,756

General and administrative expenses

54,385

32,943

Depreciation and amortization

13,566

14,348

Other charges

72,653

7,921

Total operating expenses

480,953

345,897

Operating profit

106,519

53,635

Interest expense

20,435

4,161

Interest income

(44

)

(265

)

Earnings before income taxes

86,128

49,739

Income tax expense

24,819

11,246

Net earnings

$

61,309

$

38,493

Basic weighted average shares

58,295

53,800

Basic earnings per common share

$

1.05

$

0.72

Diluted weighted average shares

67,820

55,224

Diluted earnings per common share

$

0.90

$

0.70

Rent-A-Center, Inc. and Subsidiaries

SELECTED BALANCE SHEET HIGHLIGHTS – UNAUDITED

Table 3

June 30,

(In thousands)

2021

2020

Cash and cash equivalents

$

145,072

$

206,426

Receivables, net

120,795

76,983

Prepaid expenses and other assets

46,834

33,853

Rental merchandise, net

On rent

1,122,057

645,522

Held for rent

120,784

91,647

Operating lease right-of-use assets

297,317

273,143

Goodwill

344,023

70,217

Total assets

3,035,302

1,576,628

Operating lease liabilities

$

299,537

$

281,344

Senior debt, net

842,047

190,708

Senior notes, net

435,002

—

Total liabilities

2,210,138

1,090,052

Stockholders’ equity

825,164

486,576

Rent-A-Center, Inc. and Subsidiaries

SEGMENT INFORMATION HIGHLIGHTS – UNAUDITED

Table 4

Three Months Ended June 30,

(In thousands)

2021

2020

Revenues

Rent-A-Center Business

$

505,834

$

459,192

Acima

635,280

191,243

Mexico

15,255

10,611

Franchising

37,606

22,700

Total revenues

$

1,193,975

$

683,746

Table 5

Three Months Ended June 30,

(In thousands)

2021

2020

Gross profit

Rent-A-Center Business

$

357,187

$

316,047

Acima

211,404

71,391

Mexico

10,818

7,432

Franchising

8,063

4,662

Total gross profit

$

587,472

$

399,532

Table 6

Three Months Ended June 30,

(In thousands)

2021

2020

Operating profit

Rent-A-Center Business

$

126,487

$

85,132

Acima

68,099

6,233

Mexico

2,420

1,052

Franchising

5,694

3,029

Total segments

202,700

95,446

Corporate

(96,181

)

(41,811

)

Total operating profit

$

106,519

$

53,635

Table 7

Three Months Ended June 30,

(In thousands)

2021

2020

Depreciation and amortization

Rent-A-Center Business

$

4,452

$

4,876

Acima

524

474

Mexico

119

95

Franchising

18

10

Total segments

5,113

5,455

Corporate

8,453

8,893

Total depreciation and amortization

$

13,566

$

14,348

Table 8

Three Months Ended June 30,

(In thousands)

2021

2020

Capital expenditures

Rent-A-Center Business

$

8,308

$

3,504

Acima

515

2

Mexico

190

52

Total segments

9,013

3,558

Corporate

5,000

2,041

Total capital expenditures

$

14,013

$

5,599

Table 9

On lease at June 30,

Held for lease at June 30,

(In thousands)

2021

2020

2021

2020

Lease merchandise, net

Rent-A-Center Business

$

449,243

$

399,647

$

110,560

$

85,680

Acima

653,308

232,373

1,047

1,508

Mexico

19,506

13,502

9,177

4,459

Total lease merchandise, net

$

1,122,057

$

645,522

$

120,784

$

91,647

Table 10

June 30,

(In thousands)

2021

2020

Assets

Rent-A-Center Business

$

969,617

$

866,198

Acima

1,559,381

321,883

Mexico

41,106

29,056

Franchising

14,845

14,344

Total segments

2,584,949

1,231,481

Corporate

450,353

345,147

Total assets

$

3,035,302

$

1,576,628

Non-GAAP Financial Measures

This release and the Company’s related conference call contain certain financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles (GAAP), including (1) Non-GAAP diluted earnings per share (net earnings, as adjusted for special items (as defined below), net of taxes, divided by the number of shares of our common stock on a fully diluted basis), (2) Adjusted EBITDA (net earnings before interest, taxes, depreciation and amortization, as adjusted for special items) on a consolidated and segment basis and (3) Free Cash Flow (net cash provided by operating activities less capital expenditures). “Special items” refers to certain gains and charges we view as extraordinary, unusual or non-recurring in nature and which we believe do not reflect our core business activities. For the periods presented herein, these special items are described in the quantitative reconciliation tables included below in this release. Because of the inherent uncertainty related to the special items, management does not believe it is able to provide a meaningful forecast of the comparable GAAP measures or reconciliation to any forecasted GAAP measure without unreasonable effort.

These non-GAAP measures are additional tools intended to assist our management in comparing our performance on a more consistent basis for purposes of business decision-making by removing the impact of certain items management believes do not directly reflect our core operations. These measures are intended to assist management in evaluating operating performance and liquidity, comparing performance and liquidity across periods, planning and forecasting future business operations, helping determine levels of operating and capital investments and identifying and assessing additional trends potentially impacting our Company that may not be shown solely by comparisons of GAAP measures. Consolidated Adjusted EBITDA is also used as part of our incentive compensation program for our executive officers and others.

We believe these non-GAAP financial measures also provide supplemental information that is useful to investors, analysts and other external users of our consolidated financial statements in understanding our financial results and evaluating our performance and liquidity from period to period. However, non-GAAP financial measures have inherent limitations and are not substitutes for or superior to, and they should be read together with, our consolidated financial statements prepared in accordance with GAAP. Further, because non-GAAP financial measures are not standardized, it may not be possible to compare such measures to the non-GAAP financial measures presented by other companies, even if they have the same or similar names.

Reconciliation of net earnings to net earnings excluding special items and non-GAAP diluted earnings per share:

Table 11

Three Months Ended June 30,

2021

2020

(in thousands, except per share data)

Amount

Per Share

Amount

Per Share

Net earnings

$

61,309

$

0.90

$

38,493

$

0.70

Special items, net of taxes:

Other charges (See Tables 12 and 13 below for additional detail)

58,382

0.87

5,818

0.10

Discrete income tax items⁽¹⁾

(9,119

)

(0.14

)

(185

)

—

Net earnings excluding special items

$

110,572

$

1.63

$

44,126

$

0.80

⁽¹⁾Discrete income tax items for the three months ended June 30, 2021 include the release of domestic and foreign tax valuation allowances.

Reconciliation of operating profit to Adjusted EBITDA (consolidated and by segment):

Table 12

Three Months Ended June 30, 2021

(In thousands)

Rent-A-

Center

Business

Acima

Mexico

Franchising

Corporate

Consolidated

GAAP Operating Profit (Loss)

$

126,487

$

68,099

$

2,420

$

5,694

$

(96,181

)

$

106,519

Plus: Amortization, Depreciation

4,452

524

119

18

8,453

13,566

Plus: Special Items (Extraordinary, Unusual or Non-Recurring Gains or Charges)

Acima equity consideration vesting

—

—

—

—

34,410

34,410

Acima acquired assets depreciation and amortization⁽¹⁾

—

18,388

—

—

3,972

22,360

Legal settlement reserves

—

—

—

—

3,500

3,500

Acima transaction costs

—

—

—

—

705

705

Acima integration costs

(4

)

313

—

—

379

688

Store closure costs

115

—

1

—

—

116

Adjusted EBITDA

$

131,050

$

87,324

$

2,540

$

5,712

$

(44,762

)

$

181,864

⁽¹⁾Includes amortization of approximately $29.3 million related to the total fair value of acquired intangible assets, incremental depreciation of approximately $4.0 million related to the fair value increase over net book value for acquired software assets, offset by a depreciation adjustment of approximately ($10.4) million related to a step-down of estimated fair value under net book value for acquired lease merchandise

Table 13

Three Months Ended June 30, 2020

(In thousands)

Rent-A-

Center

Business

Acima

Mexico

Franchising

Corporate

Consolidated

GAAP Operating Profit (Loss)

$

85,132

$

6,233

$

1,052

$

3,029

$

(41,811

)

$

53,635

Plus: Amortization, Depreciation

4,876

474

95

10

8,893

14,348

Plus: Special Items (Extraordinary, Unusual or Non-Recurring Gains or Charges)

Legal settlement reserves

—

—

—

—

4,400

4,400

Cost savings initiatives

175

45

—

—

1,002

1,222

State tax audit assessment reserves

261

—

—

—

564

825

Nationwide protest impacts

703

—

—

—

—

703

COVID-19 impacts

355

115

—

—

—

470

Store closure costs

452

—

7

—

—

459

Insurance reimbursement proceeds

(158

)

—

—

—

—

(158

)

Adjusted EBITDA

$

91,796

$

6,867

$

1,154

$

3,039

$

(26,952

)

$

75,904

Reconciliation of net cash provided by operating activities to free cash flow:

Table 14

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

2021

2020

2021

2020

Net cash provided by operating activities

$

114,725

$

207,319

$

250,518

$

254,719

Purchase of property assets

$

(14,013

)

(5,599

)

(25,401

)

(14,750

)

Hurricane insurance recovery proceeds

$

—

158

—

158

Free cash flow

$

100,712

$

201,878

$

225,117

$

240,127

Proceeds from sale of stores

$

—

—

—

187

Acquisitions of businesses

$

(5,639

)

—

(1,273,542

)

—

Free cash flow including acquisitions and divestitures

$

95,073

$

201,878

$

(1,048,425

)

$

240,314

View source version on businesswire.com: https://www.businesswire.com/news/home/20210804006047/en/

Rent-A-Center, Inc.

Brendan Metrano

VP, Investor Relations

972-801-1280

[email protected]

KEYWORDS: United States North America Texas

INDUSTRY KEYWORDS: Home Goods Retail Other Retail

MEDIA:

Logo

Posted on August 4, 2021 4:19 pm
Lincoln Financial Group Reports Second Quarter 2021 Results

Lincoln Financial Group Reports Second Quarter 2021 Results

Net income EPS of $3.34 and adjusted operating EPS of $3.17

Adjusted operating EPS included $(0.22) from elevated pandemic-related claims experience and $0.59 of above targeted alternative investment income

Net income ROE, including AOCI, of 12.4% and adjusted operating ROE, excluding AOCI, of 17.3%

BVPS, including AOCI, of $115.00, up 7%; BVPS, excluding AOCI, of $75.45, up 9%

$230 million of capital returned to shareholders, including $150 million in share repurchases

RADNOR, Pa.–(BUSINESS WIRE)–
Lincoln Financial Group (NYSE: LNC) today reported net income for the second quarter of 2021 of $642 million, or $3.34 per diluted share available to common stockholders, compared to a net loss in the second quarter of 2020 of $(94) million, or $(0.49) per diluted share available to common stockholders. Second quarter adjusted income from operations was $608 million, or $3.17 per diluted share available to common stockholders, compared to adjusted income from operations of $187 million, or $0.97 per diluted share available to common stockholders, in the second quarter of 2020.¹

“Second quarter adjusted income from operations was a record as our diversified business model and sources of earnings benefited from positive underwriting results, equity market tailwinds, and solid investment performance,” said Dennis R. Glass, president and CEO of Lincoln Financial Group. “We believe strongly in our ability to deliver on our long-term financial targets given sales momentum, expense management opportunities, balance sheet strength and increased capital return. We are confident that our business model will continue to deliver strong performance.”

____________________

¹ Due to reporting a net loss for the three months ended June 30, 2020, basic shares were used in the diluted EPS and adjusted diluted EPS calculations for those periods as the use of diluted shares would have resulted in a lower loss per share.

As of or For the

Quarter Ended

June 30,

As of or For the

Six Months Ended

June 30,

(in millions, except per share data)

2021

2020

2021

2020

Net Income (Loss)

$

642

$

(94)

$

867

$

(42)

Net Income (Loss) Available to Common Stockholders

642

(94)

867

(52)

Net Income (Loss) per Diluted Share Available to Common Stockholders ⁽¹⁾

3.34

(0.49)

4.51

(0.27)

Revenues

4,851

3,517

9,386

7,942

Adjusted Income (Loss) from Operations

608

187

959

652

Adjusted Income (Loss) from Operations per Diluted Share Available to Common Stockholders

3.17

0.97

4.98

3.27

Average Diluted Shares

192.2

193.8

192.4

196.2

Return on Equity (ROE), Including Accumulated Other Comprehensive Income (AOCI) (Net Income)

12.4%

-2.0%

8.3%

-0.5%

Adjusted Operating ROE, Excluding AOCI (Adjusted Income from Operations)

17.3%

5.5%

13.8%

9.6%

Book Value per Share (BVPS), Including AOCI

$

115.00

$

107.28

$

115.00

$

107.28

Book Value per Share, Excluding AOCI

75.45

69.38

75.45

69.38

¹ Due to reporting a net loss for the three months ended June 30, 2020 and six months ended June 30, 2020, basic shares were used in the diluted EPS and adjusted diluted EPS calculations for those periods as the use of diluted shares would have resulted in a lower loss per share.

Operating Highlights – Second Quarter 2021 vs. Second Quarter 2020

Operating revenues increased in all four business segments

Annuities sales of $3.2 billion, up 28%

Retirement Plan Services deposits of $2.8 billion, up 21% including double-digit growth in both first-year sales and recurring deposits

Life Insurance average account values of $59 billion, up 12%

Group Protection insurance premiums of $1.1 billion, up 2%

There were no notable items within adjusted income from operations for the current quarter or the prior-year quarter.

Second Quarter 2021 – Segment Results

Annuities

Annuities reported income from operations of $323 million, up 36% compared to the prior-year quarter. The increase was driven by higher account values from strong equity market performance and favorable returns within the company’s alternative investment portfolio.

Total annuity deposits of $3.2 billion were up 28% from the prior-year quarter. Total variable annuity sales of $3.0 billion were up 37% versus the prior-year quarter as strong growth in variable annuity sales without guaranteed living benefits more than offset declines in variable annuity sales with living benefits and fixed annuities.

Net outflows were $297 million in the quarter. Average account values for the quarter of $166 billion were up 24% over the prior-year quarter, with 48% of total annuities account values without guaranteed living benefits, up 2 percentage points over the prior-year period.

Retirement Plan Services

Retirement Plan Services reported income from operations of $62 million, up 107% compared to the prior-year quarter with the increase driven by higher account values from strong equity market performance and positive net flows and favorable returns within the company’s alternative investment portfolio.

Total deposits for the quarter of $2.8 billion were up 21% compared to the prior-year quarter driven by double-digit growth in both first-year sales and recurring deposits.

Net flows totaled $517 million for the quarter and $1.6 billion over the trailing twelve months. Average account values for the quarter of $94 billion were up 28% over the prior-year quarter.

Life Insurance

Life Insurance reported income from operations of $255 million compared to a loss from operations of $(37) million in the prior-year quarter driven by favorable returns within the company’s alternative investment portfolio and improved mortality results as pandemic impacts have declined.

Total Life Insurance sales were $126 million compared to $159 million in the prior-year quarter, however sales increased 11% sequentially.

Average Life Insurance in-force of $917 billion grew 7% over the prior-year quarter, and average account values of $59 billion increased 12% over the same period.

Group Protection

Group Protection reported income from operations of $46 million in the quarter, up 18% compared to the prior-year quarter. This improvement was driven by a lower mortality impact from the pandemic, favorable returns within the company’s alternative investment portfolio, and premium growth.

The total loss ratio was 79% in the current quarter compared to 78% in the prior-year quarter with the slight increase driven by favorable dental utilization in the prior-year quarter.

Group Protection sales were $79 million in the quarter compared to $105 million in the prior-year quarter. Employee-paid sales represented 56% of total sales. Insurance premiums of $1.1 billion in the quarter were up 2% compared to the prior-year quarter.

Other Operations

Other Operations reported a loss from operations of $(78) million versus a loss of $(82) million in the prior-year quarter.

Realized Gains and Losses / Impacts to Net Income

Realized gains/losses and impacts to net income (after-tax) in the quarter were primarily driven by:

A $14 million realized gain related to financial assets.

A $13 million gain from variable annuity hedge program performance.

An $8 million gain from indexed annuity forward-starting options.

Unrealized Gains and Losses

The company reported a net unrealized gain of $15.5 billion, pre-tax, on its available-for-sale securities at June 30, 2021. This compares to a net unrealized gain of $14.7 billion, pre-tax, at June 30, 2020, with the year-over-year increase primarily driven by tighter credit spreads.

Share Count

The quarter’s average diluted share count of 192.2 million was down 1% from the second quarter of 2020, the result of repurchasing 5.2 million shares of stock at a cost of $305 million since June 30, 2020.

Book Value

As of June 30, 2021, book value per share, including AOCI, increased 7% from the prior-year period to $115.00. Book value per share, excluding AOCI, increased 9% from the prior-year period to $75.45.

The tables attached to this release define and reconcile the non-GAAP measures adjusted income from operations, adjusted operating ROE and BVPS, excluding AOCI, to net income, ROE and BVPS, including AOCI, calculated in accordance with GAAP.

This press release contains statements that are forward-looking, and actual results may differ materially. Please see the Forward-looking Statements – Cautionary Language at the end of this release for factors that may cause actual results to differ materially from the company’s current expectations.

For other financial information, please refer to the company’s second quarter 2021 statistical supplement available on its website, http://www.lfg.com/investor.

Lincoln Financial Group will discuss the company’s second quarter results with investors in a conference call beginning at 10:00 a.m. Eastern Time on Thursday, August 5, 2021. The conference call will be broadcast live through the company website at www.lfg.com/webcast. Please log on at least fifteen minutes prior to the call to register and download any necessary streaming media software. To participate via phone: (866) 394-4575 (U.S./Canada) or (678) 509-7536 (International). Ask for the Lincoln National Conference Call.

A replay of the call will be available by 1:00 p.m. Eastern Time on August 5, 2021 at www.lfg.com/webcast. Audio replay will be available from 1:00 p.m. Eastern Time on August 5, 2021 through 12:00 p.m. Eastern Time on August 12, 2021. To access the re-broadcast, dial: (855) 859-2056 (Domestic) or (404) 537-3406 (International). Enter conference code: 1735199.

About Lincoln Financial Group

Lincoln Financial Group provides advice and solutions that help people take charge of their financial lives with confidence and optimism. Today, more than 17 million customers trust our retirement, insurance and wealth protection expertise to help address their lifestyle, savings and income goals, and guard against long-term care expenses. Headquartered in Radnor, Pennsylvania, Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. The company had $324 billion in end-of-period account values as of June 30, 2021. Lincoln Financial Group is a committed corporate citizen included on major sustainability indices including the Dow Jones Sustainability Index North America and FTSE4Good. Dedicated to diversity and inclusion, we earned perfect 100 percent scores on the Corporate Equality Index and the Disability Equality Index, and rank among Forbes’ Best Large Employers and Best Employers for Women, and Newsweek’s Most Responsible Companies. Learn more at: www.LincolnFinancial.com. Follow us on Facebook, Twitter, LinkedIn, and Instagram. Sign up for email alerts at http://newsroom.lfg.com.

Explanatory Notes on Use of Non-GAAP Measures

Management believes that adjusted income from operations (adjusted operating income), adjusted operating return on equity, adjusted operating revenues, and adjusted operating EPS better explain the results of the company’s ongoing businesses in a manner that allows for a better understanding of the underlying trends in the company’s current business because the excluded items are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments, and, in most instances, decisions regarding these items do not necessarily relate to the operations of the individual segments. Management also believes that using book value excluding accumulated other comprehensive income (“AOCI”) enables investors to analyze the amount of our net worth that is primarily attributable to our business operations. Book value per share excluding AOCI is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates.

For the historical periods, reconciliations of non-GAAP measures used in this press release to the most directly comparable GAAP measure may be included in this Appendix to the press release and/or are included in the Statistical Reports for the corresponding periods contained in the Earnings section of the Investor Relations page on our website: www.lfg.com/investor.

Definitions of Non-GAAP Measures Used in this Press Release

Adjusted income (loss) from operations, adjusted operating revenues and adjusted operating return on equity (including and excluding average goodwill within average equity), excluding AOCI, using annualized adjusted income (loss) from operations are financial measures we use to evaluate and assess our results. Adjusted income (loss) from operations, adjusted operating revenues and adjusted operating return on equity (“ROE”), as used in the press release, are non-GAAP financial measures and do not replace GAAP net income (loss), revenues and ROE, the most directly comparable GAAP measures.

Adjusted Income (Loss) from Operations

Adjusted income (loss) from operations is GAAP net income (loss) excluding the after-tax effects of the following items, as applicable:

Realized gains and losses associated with the following (“excluded realized gain (loss)”):

Sales or disposals and impairments of financial assets;

Changes in the fair value of equity securities;

Changes in the fair value of derivatives, embedded derivatives within certain reinsurance arrangements and trading securities (“gain (loss) on the mark-to-market on certain instruments”);

Changes in the fair value of the derivatives we own to hedge our guaranteed death benefit (“GDB”) riders within our variable annuities;

Changes in the fair value of the embedded derivatives of our guaranteed living benefit (“GLB”) riders reflected within variable annuity net derivative results accounted for at fair value;

Changes in the fair value of the derivatives we own to hedge our GLB riders reflected within variable annuity net derivative results; and

Changes in the fair value of the embedded derivative liabilities related to index options we may purchase or sell in the future to hedge contract holder index allocations applicable to future reset periods for our indexed annuity products accounted for at fair value (“indexed annuity forward-starting options”);

Changes in reserves resulting from benefit ratio unlocking on our GDB and GLB riders (“benefit ratio unlocking”);

Income (loss) from reserve changes, net of related amortization, on business sold through reinsurance;

Gains (losses) on early extinguishment of debt;

Losses from the impairment of intangible assets;

Income (loss) from discontinued operations;

Acquisition and integration costs related to mergers and acquisitions; and

Income (loss) from the initial adoption of new accounting standards, regulations and policy changes including the net impact from the Tax Cuts and Jobs Act.

Adjusted Operating Revenues

Adjusted operating revenues represent GAAP revenues excluding the pre-tax effects of the following items, as applicable:

Excluded realized gain (loss);

Revenue adjustments from the initial adoption of new accounting standards;

Amortization of deferred front-end loads (“DFEL”) arising from changes in GDB and GLB benefit ratio unlocking; and

Amortization of deferred gains arising from reserve changes on business sold through reinsurance.

Adjusted Operating Return on Equity

Adjusted operating return on equity measures how efficiently we generate profits from the resources provided by our net assets.

It is calculated by dividing annualized adjusted income (loss) from operations by average equity, excluding accumulated other comprehensive income (loss) (“AOCI”).

Management evaluates return on equity by both including and excluding average goodwill within average equity.

Definition of Notable Items

Adjusted income (loss) from operations, excluding notable items, is a non-GAAP measure that excludes items which, in management’s view, do not reflect the company’s normal, ongoing operations.

We believe highlighting notable items included in adjusted income (loss) from operations enables investors to better understand the fundamental trends in its results of operations and financial condition.

Book Value Per Share, Excluding AOCI

Book value per share, excluding AOCI is calculated based upon a non-GAAP financial measure.

It is calculated by dividing (a) stockholders’ equity, excluding AOCI by (b) common shares outstanding.

We provide book value per share excluding AOCI to enable investors to analyze the amount of our net worth that is primarily attributable to our business operations.

Management believes book value per share, excluding AOCI is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates.

Book value per share is the most directly comparable GAAP measure.

Special Note

Sales

Sales as reported consist of the following:

Annuities and Retirement Plan Services – deposits from new and existing customers;

Universal life insurance (“UL”), indexed universal life insurance (“IUL”), variable universal life insurance (“VUL”) – first-year commissionable premiums plus 5% of excess premiums received;

MoneyGuard^®linked-benefit products – MoneyGuard^® (UL), 15% of total expected premium deposits, and MoneyGuard Market Advantage^SM(VUL), 150% of commissionable premiums;

Executive Benefits – single premium bank-owned UL and VUL, 15% of single premium deposits, and corporate-owned UL and VUL, first-year commissionable premiums plus 5% of excess premium received;

Term – 100% of annualized first-year premiums; and

Group Protection – annualized first-year premiums from new policies.

Lincoln National Corporation

Reconciliation of Net Income to Adjusted Income from Operations

(in millions, except per share data)

For the Quarter Ended

For the Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Total Revenues

$

4,851

$

3,517

$

9,386

$

7,942

Less:

Excluded realized gain (loss)

(53)

(694)

(281)

(770)

Amortization of DFEL on benefit ratio unlocking

1

2

2

(7)

Total Adjusted Operating Revenues

$

4,903

$

4,209

$

9,665

$

8,719

Net Income (Loss) Available to Common Stockholders – Diluted
$

642

$

(94)

$

867

$

(52)

Less:

Adjustment for deferred units of LNC stock in our deferred compensation plans ⁽¹⁾

–

–

–

(10)

Net Income (Loss)

642

(94)

867

(42)

Less:

Excluded realized gain (loss), after-tax

(43)

(548)

(223)

(609)

Benefit ratio unlocking, after-tax

77

282

131

(67)

Acquisition and integration costs related to mergers and acquisitions, after-tax

–

(3)

–

(6)

Gain (loss) on early extinguishment of debt, after-tax

–

(12)

–

(12)

Total adjustments

34

(281)

(92)

(694)

Adjusted Income (Loss) from Operations

$

608

$

187

$

959

$

652

Earnings (Loss) Per Common Share – Diluted ⁽²⁾

Net income (loss)

$

3.34

$

(0.49)

$

4.51

$

(0.27)

Adjusted income (loss) from operations

3.17

0.97

4.98

3.27

Average Stockholders’ Equity

Average equity, including average AOCI

$

20,669

$

18,653

$

20,908

$

18,393

Average AOCI

6,620

5,164

6,983

4,751

Average equity, excluding AOCI

14,049

13,489

13,925

13,642

Average goodwill

1,778

1,778

1,778

1,778

Average equity, excluding AOCI and goodwill

$

12,271

$

11.711

$

12,147

$

11,864

Return on Equity, Including AOCI

Net income (loss) with average equity including goodwill

12.4%

-2.0%

8.3%

-0.5%

Adjusted Operating Return on Equity, Excluding AOCI

Adjusted income (loss) from operations with average equity including goodwill

17.3%

5.5%

13.8%

9.6%

Adjusted income (loss) from operations with average equity excluding goodwill

19.8%

6.4%

15.8%

11.0%

(1)

If the effect of equity classification would result in a more dilutive EPS, the numerator used in the calculation of our diluted EPS is adjusted to remove the mark-to-market adjustment for deferred units of LNC stock in our deferred compensation plans.

(2)

In periods where a net loss or adjusted loss from operations is presented, basic shares are used in the diluted EPS and adjusted diluted EPS calculations, as the use of diluted shares would result in a lower loss per share.

Lincoln National Corporation

Reconciliation of Book Value per Share

As of June 30,

2021

2020

Book value per share, including AOCI

$

115.00

$

107.28

Per share impact of AOCI

39.55

37.90

Book value per share, excluding AOCI

75.45

69.38

Lincoln National Corporation

Digest of Earnings

(in millions, except per share data)

For the Quarter Ended

June 30,

2021

2020

Revenues

$

4,851

$

3,517

Net Income (Loss)

$

642

$

(94)

Adjustment for deferred units of LNC stock in our deferred compensation plans ⁽¹⁾

–

–

Net Income (Loss) Available to Common Stockholders – Diluted

$

642

$

(94)

Earnings (Loss) Per Common Share – Basic

$

3.38

$

(0.49)

Earnings (Loss) Per Common Share – Diluted ⁽²⁾

3.34

(0.49)

Average Shares – Basic

189,987,670

193,228,547

Average Shares – Diluted

192,202,398

193,776,452

For the Six Months Ended

June 30,

2021

2020

Revenues

$

9,386

$

7,942

Net Income (Loss)

$

867

$

(42)

Adjustment for deferred units of LNC stock in our deferred compensation plans ⁽¹⁾

–

(10)

Net Income (Loss) Available to Common Stockholders – Diluted

$

867

$

(52)

Earnings (Loss) Per Common Share – Basic

$

4.54

$

(0.22)

Earnings (Loss) Per Common Share – Diluted ⁽²⁾

4.51

(0.27)

Average Shares – Basic

190,878,951

194,152,672

Average Shares – Diluted

192,362,012

196,236,491

(1)

If the effect of equity classification would result in a more dilutive EPS, the numerator used in the calculation of our diluted EPS is adjusted to remove the mark-to-market adjustment for deferred units of LNC stock in our deferred compensation plans.

(2)

In periods where a net loss or adjusted loss from operations is presented, basic shares are used in the diluted EPS and adjusted diluted EPS calculations, as the use of diluted shares would result in a lower loss per share.

Forward Looking Statements — Cautionary Language

Certain statements made in this press release and in other written or oral statements made by Lincoln or on Lincoln’s behalf are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements. Forward-looking statements may contain words like: “anticipate,” “believe,” “estimate,” “expect,” “project,” “shall,” “will,” and other words or phrases with similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, trends in Lincoln’s businesses, prospective services or products, future performance or financial results, and the outcome of contingencies, such as legal proceedings. Lincoln claims the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA.

Forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those expressed in or implied by such forward-looking statements due to a variety of factors, including:

The continuation of the COVID-19 pandemic, or future outbreaks of COVID-19, and uncertainty surrounding the length and severity of future impacts on the global economy and on our business, results of operations and financial condition;

Further deterioration in general economic and business conditions that may affect account values, investment results, guaranteed benefit liabilities, premium levels and claims experience;

Adverse global capital and credit market conditions that may affect our ability to raise capital, if necessary, and may cause us to realize impairments on investments and certain intangible assets, including goodwill and the valuation allowance against deferred tax assets, which may reduce future earnings and/or affect our financial condition and ability to raise additional capital or refinance existing debt as it matures;

The inability of our subsidiaries to pay dividends to the holding company in sufficient amounts, which could harm the holding company’s ability to meet its obligations;

Legislative, regulatory or tax changes, both domestic and foreign, that affect: the cost of, or demand for, our subsidiaries’ products; the required amount of reserves and/or surplus; our ability to conduct business and our captive reinsurance arrangements as well as restrictions on the payment of revenue sharing and 12b-1 distribution fees;

The impact of U.S. federal tax reform legislation on our business, earnings and capital;

The impact of Regulation Best Interest or other regulations adopted by the Securities and Exchange Commission (“SEC”), the Department of Labor, or other federal or state regulators or self-regulatory organizations relating to the standard of care owed by investment advisers and/or broker dealers that could affect our distribution model;

Actions taken by reinsurers to raise rates on in-force business;

Further declines in or sustained low interest rates causing a reduction in investment income, the interest margins of our businesses, estimated gross profits and demand for our products;

Rapidly increasing interest rates causing contract holders to surrender life insurance and annuity policies, thereby causing realized investment losses, and reduced hedge performance related to variable annuities;

The impact of the implementation of the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to the regulation of derivatives transactions;

The initiation of legal or regulatory proceedings against us, and the outcome of any legal or regulatory proceedings, such as: adverse actions related to present or past business practices common in businesses in which we compete; adverse decisions in significant actions including, but not limited to, actions brought by federal and state authorities and class action cases; new decisions that result in changes in law; and unexpected trial court rulings;

A decline or continued volatility in the equity markets causing a reduction in the sales of our subsidiaries’ products; a reduction of asset-based fees that our subsidiaries charge on various investment and insurance products; an acceleration of the net amortization of deferred acquisition costs (“DAC”), value of business acquired (“VOBA”), deferred sales inducements (“DSI”) and deferred front-end loads (“DFEL”); and an increase in liabilities related to guaranteed benefit features of our subsidiaries’ variable annuity products;

Ineffectiveness of our risk management policies and procedures, including various hedging strategies used to offset the effect of changes in the value of liabilities due to changes in the level and volatility of the equity markets and interest rates;

A deviation in actual experience regarding future persistency, mortality, morbidity, interest rates or equity market returns from the assumptions used in pricing our subsidiaries’ products, in establishing related insurance reserves and in the net amortization of DAC, VOBA, DSI and DFEL, which may reduce future earnings;

Changes in accounting principles that may affect our business, results of operations and financial condition;

Lowering of one or more of our debt ratings issued by nationally recognized statistical rating organizations and the adverse effect such action may have on our ability to raise capital and on our liquidity and financial condition;

Lowering of one or more of the insurer financial strength ratings of our insurance subsidiaries and the adverse effect such action may have on the premium writings, policy retention, profitability of our insurance subsidiaries and liquidity;

Significant credit, accounting, fraud, corporate governance or other issues that may adversely affect the value of certain financial assets, as well as counterparties to which we are exposed to credit risk requiring that we realize losses on financial assets;

Interruption in telecommunication, information technology or other operational systems, or failure to safeguard the confidentiality or privacy of sensitive data on such systems, including from cyberattacks or other breaches of our data security systems;

The effect of acquisitions and divestitures, restructurings, product withdrawals and other unusual items;

The adequacy and collectability of reinsurance that we have purchased;

Future pandemics, acts of terrorism, war or other man-made and natural catastrophes that may adversely affect our businesses and the cost and availability of reinsurance;

Competitive conditions, including pricing pressures, new product offerings and the emergence of new competitors, that may affect the level of premiums and fees that our subsidiaries can charge for their products;

The unknown effect on our subsidiaries’ businesses resulting from evolving market preferences and the changing demographics of our client base; and

The unanticipated loss of key management, financial planners or wholesalers.

The risks and uncertainties included here are not exhaustive. Our most recent Form 10-K, as well as other reports that we file with the SEC, include additional factors that could affect our businesses and financial performance. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.

Further, it is not possible to assess the effect of all risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. In addition, Lincoln disclaims any obligation to update any forward-looking statements to reflect events or circumstances that occur after the date of this press release.

The reporting of Risk Based Capital (“RBC”) measures is not intended for the purpose of ranking any insurance company or for use in connection with any marketing, advertising or promotional activities.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210804006028/en/

Al Copersino

(203) 257-4493

Investor Relations

[email protected]

Holly Fair

(484) 583-1632

Media Relations

[email protected]

KEYWORDS: United States North America Pennsylvania

INDUSTRY KEYWORDS: Finance Consulting Banking Professional Services Insurance

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Posted on August 4, 2021 4:19 pm
Summit Materials, Inc. Reports Second Quarter 2021 Results

Summit Materials, Inc. Reports Second Quarter 2021 Results

– Record Second Quarter Net Revenue of $618.5 million, an increase of 7.5%

-Net income attributable to Summit Inc. of $56.7 million

-Record Second Quarter Adjusted EBITDA of $163.8 million, an increase of 2.4%

-Aggregates volumes increased 14.7%

-Cement volumes increased 8.3%

DENVER–(BUSINESS WIRE)–
Summit Materials, Inc. (NYSE: SUM, “Summit,” “Summit Materials,” “Summit Inc.” or the “Company”), a leading vertically integrated construction materials company, today announced results for the second quarter 2021.

For the three months ended July 3, 2021, the Company reported net income attributable to Summit Inc. of $56.7 million, or $0.48 per basic share, compared to net income attributable to Summit Inc. of $57.1 million, or $0.50 per basic share in the comparable prior year period. Summit reported adjusted diluted net income of $58.0 million, or $0.49 per adjusted diluted share as compared to adjusted diluted net income of $58.9 million, or $0.50 per adjusted diluted share in the prior year period.

Summit’s net revenue increased $43.3 million, or 7.5% in the second quarter of 2021 to $618.5 million, compared to $575.2 million in the second quarter of 2020, on higher aggregates, ready-mix concrete and cement revenue relative to a year ago on continued favorable market demand conditions and price growth in all lines of business.

The Company reported operating income of $95.9 million in the second quarter 2021, a decrease of 4.1%, compared to $100.1 million in the prior year period. Higher aggregates, cement and ready-mix volume and prices across the business were offset by increases in cost of revenue and general and administrative expenses associated with implementation of our Elevate Summit strategy, combined with fewer working days in Texas due to unusually wet conditions in May. Summit’s operating margin percentage for the three months ended July 3, 2021 decreased to 15.5% from 17.4%, from the comparable period a year ago, due to the factors noted above.

Adjusted EBITDA increased in the second quarter 2021 to $163.8 million as compared to $159.9 million in the second quarter 2020.

For the three months ended July 3, 2021, sales volumes increased 14.7% in aggregates, 8.3% in cement and 6.3% in ready-mix concrete relative to the same period last year on strong demand in most of our markets. Average selling prices in the second quarter of 2021 increased 2.4% in aggregates, 2.9% in cement, 3.0% in ready-mix concrete and 0.7% in asphalt. Adjusted cash gross profit for aggregates expanded to $85.8 million in the second quarter 2021, an increase of 14.3% relative to $75.0 million in the year ago quarter.

Anne Noonan, CEO of Summit Materials, commented, “Today we are reporting Summit’s third consecutive quarter of record Adjusted EBITDA. These results reflect our team’s commitment to operational and commercial excellence, which delivered volume growth in most lines of business and pricing growth in all lines of business. Demand fundamentals remain strong in our rural and exurban markets, while most of the state Departments of Transportation that we serve have returned to typical letting and operating conditions.

As part of our Elevate Summit strategy, we have now completed a total of five strategic divestitures, as we exit non-core or non-leading market positions, unlock proceeds for more strategic use, and convert some of those businesses to an asset light model to drive higher aggregates pull through. We believe Summit’s organic growth profile and asset light conversion model position the company to absorb the impact of the foregone contribution from those five divested businesses, so we are leaving our full year Adjusted EBITDA guidance unchanged at this time.”

As of July 3, 2021, the Company had $469.1 million in cash and $1.9 billion in debt outstanding. The Company’s $345 million revolving credit facility has $329.1 million available after outstanding letters of credit. For the quarter ended July 3, 2021, cash flow provided by operations was $74.7 million and cash paid for capital expenditures was $132.7 million.

Brian Harris, CFO of Summit Materials, added, “We are making meaningful progress on the leverage reduction element of our Elevate Summit strategy. Our Elevate Summit goal is less than 3.0x leverage, and we continue to believe that is within our sights in 2021.”

For the full year 2021, Summit has not made any changes to its outlook for Adjusted EBITDA of approximately $490 million to $520 million, but may revisit this forecast as the year progresses. The Company continues to expect 2021 capital expenditure guidance of approximately $200 million to $220 million including approximately $25 million to $35 million for greenfield projects.

Second Quarter 2021 | Results by Line of Business

Aggregates Business: Aggregates net revenues increased by $23.5 million to $153.5 million in the second quarter 2021 when compared to the prior year period. Aggregates adjusted cash gross profit margin decreased to 55.9% in the second quarter 2021 as compared to 57.7% in the second quarter 2020. Aggregates sales volumes increased 14.7% in the second quarter 2021 when compared to the prior year period on organic growth in both the West and East segments. Volume increased in the Intermountain West, Virginia, Carolinas, Georgia, and British Columbia markets, partially offset by slight decreases in Kansas and Missouri as wind farm and flood repair volumes in the second quarter of 2020 did not repeat in 2021. Average selling prices for aggregates increased 2.4% in the second quarter 2021.

Cement Business: Cement segment net revenues increased 13.4% to $85.8 million in the second quarter 2021, when compared to the prior year period, on higher sales volume of cement. Cement adjusted cash gross profit margin decreased to 47.2% in the second quarter, compared to 50.8% in the prior year period. Our Green America Recycling facility continues to ramp up production following an explosion that occurred in April 2020. Sales volume of cement increased 8.3% in the second quarter and average selling prices increased 2.9% when compared to the prior year period.

Products Business: Products net revenues were $292.1 million in the second quarter 2021, compared to $285.0 million in the prior year period. Products adjusted cash gross profit margin decreased to 18.8% in the second quarter, versus 20.6% in the prior year period. Our organic average sales price for ready-mix concrete increased 3.0% and organic sales volumes of ready-mix concrete increased 6.3%, as volume increased in our Intermountain West, Texas, and British Columbia markets, and prices increased in most markets. Our organic average sales price for asphalt increased 0.7%, with pricing gains across our Texas geographies and British Columbia, while volume decreased 11.3%, due to a divestiture of a paving business.

Second Quarter 2021 | Results By Reporting Segment

Net revenue increased by 7.5% to $618.5 million in the second quarter 2021, versus $575.2 million in the prior year period on organic growth in our aggregates, cement, and ready-mix concrete operations. The Company reported operating income of $95.9 million in the second quarter 2021, compared to $100.1 million in the prior year period as favorable volume and price trends in most lines of business were partially offset by fewer working days in Texas due to unusually wet conditions in May.

Net income decreased to $57.8 million in the second quarter of 2021, compared to income of $58.9 million in the prior year period. Adjusted EBITDA increased 2.4% to $163.8 million in the second quarter of 2021, compared to $159.9 million in the prior year period on higher revenue.

West Segment: The West Segment reported operating income of $53.2 million in the second quarter 2021, compared to $56.7 million in the prior year period. Adjusted EBITDA was $78.8 million in the second quarter 2021, compared to $78.9 million in the prior year period, as higher volume and price for aggregates and ready-mix concrete were offset by fewer working days in Texas, which negatively impacted asphalt and paving volumes in particular. Market conditions continue to reflect strong demand for aggregates and ready-mix concrete, particularly in the Houston and Salt Lake City areas. Aggregates revenue in the second quarter increased 32.7% over the prior year period, while organic volumes and average sales prices increased 4.8% and 5.0%, respectively. Ready-mix concrete revenue in the second quarter 2021 increased 15.5% over the prior year period, as organic volumes increased 13.2% and organic average sales prices increased 2.2%, reflecting favorable market conditions for residential construction. Asphalt revenue decreased by 26.8% in the second quarter 2021 over the prior year period as asphalt volumes decreased 25.8%, due to wet conditions in Texas cited above, and sales prices increased 1.7%.

East Segment: The East Segment reported operating income of $34.6 million in the second quarter 2021, compared to $31.5 million in the prior year period as net revenue increases in aggregates, asphalt and paving and related services exceeded a decrease in ready-mix concrete. Adjusted EBITDA increased to $57.3 million in the second quarter 2021, compared to $53.4 million in the prior year period. Aggregates revenue increased 7.4%, as volumes increased 3.4% and average selling prices increased 3.8%. Ready-mix concrete revenue decreased 6.7% as organic volumes decreased by 11.4%, partially offset by organic average selling prices which increased 5.3%, primarily due to lower volumes in Kansas as wind farm projects in 2020 were not fully replaced in 2021. Asphalt revenue increased 35.8% as organic volumes increased 27.3% on higher volumes in Kentucky, Kansas and Virginia, while organic average selling prices increased 0.6% on lower liquid asphalt index prices in most of our markets.

Cement Segment: The Cement Segment reported operating income of $25.8 million in the second quarter 2021, compared to $26.1 million in the prior year period. Adjusted EBITDA increased to $39.4 million in the second quarter 2021, compared to $35.6 million in the prior year period on higher volumes. The segment reported increased organic sales volumes and organic average selling prices of 8.3% and 2.9%, respectively, during the second quarter 2021 as compared to the prior year period. Our Green America Recycling facility continues to ramp up production following an explosion that occurred in April 2020.

Liquidity and Capital Resources

As of July 3, 2021, the Company had cash on hand of $469.1 million and borrowing capacity under its $345 million revolving credit facility of $329.1 million. The borrowing capacity on the revolving credit facility is currently fully available to the Company within the terms and covenant requirements of its credit agreement. As of July 3, 2021, the Company had $1.9 billion in debt outstanding.

Financial Outlook

For the full year 2021, Summit has not made any changes to its outlook for Adjusted EBITDA of approximately $490 million to $520 million, but may revisit this forecast as the year progresses. The Company continues to expect 2021 capital expenditure guidance of approximately $200 million to $220 million including approximately $25 million to $35 million for greenfield projects.

Webcast and Conference Call Information

Summit Materials will conduct a conference call on Thursday, August 5, 2021, at 11:00 a.m. eastern time (9:00 a.m. mountain time) to review the Company’s second quarter 2021 financial results, discuss recent events and conduct a question-and-answer session.

A webcast of the conference call and accompanying presentation materials will be available in the Investors section of Summit’s website at investors.summit-materials.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download, and install any necessary audio software.

To participate in the live teleconference on August 5, 2021:

Domestic Live: 1-877-823-8690

International Live: 1-825-312-2236

Conference ID: 3865846

Password: Summit

To listen to a replay of the teleconference, which will be available through August 12, 2021:

Domestic Replay: 1-800-585-8367

International Replay: 1-416-621-4642

Conference ID: 3865846

About Summit Materials

Summit Materials is a leading vertically integrated materials-based company that supplies aggregates, cement, ready-mix concrete and asphalt in the United States and British Columbia, Canada. Summit is a geographically diverse, materials-based business of scale that offers customers a single-source provider of construction materials and related downstream products in the public infrastructure, residential and nonresidential end markets. Summit has a strong track record of successful acquisitions since its founding and continues to pursue growth opportunities in new and existing markets. For more information about Summit Materials, please visit www.summit-materials.com.

Non-GAAP Financial Measures

The Securities and Exchange Commission (“SEC”) regulates the use of “non-GAAP financial measures,” such as Adjusted Net Income (Loss), Adjusted Diluted Net Income, Adjusted Diluted EPS, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Cash Gross Profit, Adjusted Cash Gross Profit Margin, Free Cash Flow, Net Leverage and Net Debt which are derived on the basis of methodologies other than in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). We have provided these measures because, among other things, we believe that they provide investors with additional information to measure our performance, evaluate our ability to service our debt and evaluate certain flexibility under our restrictive covenants. Our Adjusted Net Income (Loss), Adjusted Diluted Net Income, Adjusted Diluted EPS, Adjusted EBITDA, Further Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Cash Gross Profit, Adjusted Cash Gross Profit Margin, Free Cash Flow, Net Leverage and Net Debt may vary from the use of such terms by others and should not be considered as alternatives to or more important than net income (loss), operating income (loss), revenue or any other performance measures derived in accordance with U.S. GAAP as measures of operating performance or to cash flows as measures of liquidity.

Adjusted EBITDA, Adjusted EBITDA Margin, and other non-GAAP measures have important limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under U.S. GAAP. Some of the limitations of Adjusted EBITDA are that these measures do not reflect: (i) our cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) changes in, or cash requirements for, our working capital needs; (iii) interest expense or cash requirements necessary to service interest and principal payments on our debt; and (iv) income tax payments we are required to make. Because of these limitations, we rely primarily on our U.S. GAAP results and use Adjusted EBITDA, Adjusted EBITDA Margin and other non-GAAP measures on a supplemental basis.

Adjusted EBITDA, Further Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Cash Gross Profit, Adjusted Cash Gross Profit Margin, Adjusted Net Income (Loss), Adjusted Diluted Net Income, Adjusted Diluted EPS, Free Cash Flow, Net Leverage and Net Debt reflect additional ways of viewing aspects of our business that, when viewed with our GAAP results and the accompanying reconciliations to U.S. GAAP financial measures included in the tables attached to this press release, may provide a more complete understanding of factors and trends affecting our business. We strongly encourage investors to review our consolidated financial statements in their entirety and not rely on any single financial measure. Reconciliations of the non-GAAP measures used in this press release are included in the attached tables. Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, we have not provided reconciliations for forward-looking non-GAAP measures. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.

Cautionary Statement Regarding Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include all statements that do not relate solely to historical or current facts, and you can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “outlook,” “seeks,” “intends,” “trends,” “plans,” “estimates,” “projects” or “anticipates” or similar expressions that concern our strategy, plans, expectations or intentions. All statements made relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results are forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, it is very difficult to predict the effect of known factors, and, of course, it is impossible to anticipate all factors that could affect our actual results. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be realized. Important factors could affect our results and could cause results to differ materially from those expressed in our forward-looking statements, including but not limited to the factors discussed in the section entitled “Risk Factors” in Summit Inc.’s Annual Report on Form 10-K for the fiscal year ended January 2, 2021, as filed with the SEC, and any factors discussed in the section entitled “Risk Factors” in any of our subsequently filed SEC filings.

the impact of the COVID-19 pandemic, or any similar crisis, on our business;

our dependence on the construction industry and the strength of the local economies in which we operate;

the cyclical nature of our business;

risks related to weather and seasonality;

risks associated with our capital-intensive business;

competition within our local markets;

our ability to execute on our acquisition strategy, successfully integrate acquisitions with our existing operations and retain key employees of acquired businesses;

our ability to implement and successfully execute on our Elevate Summit Strategy;

our dependence on securing and permitting aggregate reserves in strategically located areas;

declines in public infrastructure construction and delays or reductions in governmental funding, including the funding by transportation authorities and other state agencies particularly if such are not augmented by federal funding or if the federal government fails to act on highway infrastructure bill;

our reliance on private investment in infrastructure, which may be adversely affected by periods of economic stagnation and recession;

environmental, health, safety and climate change laws or governmental requirements or policies concerning zoning and land use;

costs associated with pending and future litigation;

rising prices for commodities, labor and other production and delivery inputs as a result of inflation or otherwise;

conditions in the credit markets;

our ability to accurately estimate the overall risks, requirements or costs when we bid on or negotiate contracts that are ultimately awarded to us;

material costs and losses as a result of claims that our products do not meet regulatory requirements or contractual specifications;

cancellation of a significant number of contracts or our disqualification from bidding for new contracts;

special hazards related to our operations that may cause personal injury or property damage not covered by insurance;

unexpected factors affecting self-insurance claims and reserve estimates;

our substantial current level of indebtedness, including our exposure to variable interest rate risk;

our dependence on senior management and other key personnel, and our ability to retain and attract qualified personnel;

supply constraints or significant price fluctuations in the electricity and petroleum-based resources that we use, including diesel and liquid asphalt;

climate change and climate change legislation or other regulations;

unexpected operational difficulties;

interruptions in our information technology systems and infrastructure; including cybersecurity and data leakage risks; and

potential labor disputes, strikes, other forms of work stoppage or other union activities.

All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements. Any forward-looking statement that we make herein speaks only as of the date of this press release. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law.

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Operations

($ in thousands, except share and per share amounts)

Three months ended

Six months ended

July 3,

June 27,

July 3,

June 27,

2021

2020

2021

2020

Revenue:

Product

$

527,800

$

488,260

$

882,034

$

793,567

Service

90,730

86,980

134,977

124,079

Net revenue

618,530

575,240

1,017,011

917,646

Delivery and subcontract revenue

49,387

55,769

78,750

80,553

Total revenue

667,917

631,009

1,095,761

998,199

Cost of revenue (excluding items shown separately below):

Product

346,697

315,079

623,831

569,134

Service

71,632

68,660

111,829

107,184

Net cost of revenue

418,329

383,739

735,660

676,318

Delivery and subcontract cost

49,387

55,769

78,750

80,553

Total cost of revenue

467,716

439,508

814,410

756,871

General and administrative expenses

47,448

39,727

99,090

81,413

Depreciation, depletion, amortization and accretion

58,233

53,928

114,569

105,706

Gain on sale of property, plant and equipment

(1,403

)

(2,214

)

(3,172

)

(4,131

)

Operating income

95,923

100,060

70,864

58,340

Interest expense

24,216

25,608

48,402

53,426

Loss (gain) on sale of businesses

236

—

(15,432

)

—

Other income, net

(4,695

)

(1,616

)

(9,584

)

(1,527

)

Income from operations before taxes

76,166

76,068

47,478

6,441

Income tax expense (benefit)

18,408

17,181

12,965

(5,720

)

Net income

57,758

58,887

34,513

12,161

Net income attributable to Summit Holdings (1)

1,099

1,823

371

76

Net income attributable to Summit Inc.

$

56,659

$

57,064

$

34,142

$

12,085

Earnings per share of Class A common stock:

Basic

$

0.48

$

0.50

$

0.29

$

0.11

Diluted

$

0.48

$

0.50

$

0.29

$

0.11

Weighted average shares of Class A common stock:

Basic

117,637,036

114,111,204

116,650,881

113,856,657

Diluted

118,585,398

114,137,857

117,832,026

114,252,268

(1) Represents portion of business owned by pre-IPO investors rather than by Summit.

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

($ in thousands, except share and per share amounts)

July 3,

January 2,

2021

2021

(unaudited)

(audited)

Assets

Current assets:

Cash and cash equivalents

$

469,097

$

418,181

Accounts receivable, net

316,615

254,696

Costs and estimated earnings in excess of billings

28,717

8,666

Inventories

198,217

200,308

Other current assets

15,271

11,428

Total current assets

1,027,917

893,279

Property, plant and equipment, less accumulated depreciation, depletion and amortization (July 3, 2021 – $1,184,841 and January 2, 2021 – $1,132,925)

1,865,841

1,850,169

Goodwill

1,176,351

1,201,291

Intangible assets, less accumulated amortization (July 3, 2021 – $13,366 and January 2, 2021 – $11,864)

71,409

47,852

Deferred tax assets, less valuation allowance (July 3, 2021 – $1,675 and January 2, 2021 – $1,675)

226,722

231,877

Operating lease right-of-use assets

28,164

28,543

Other assets

55,981

55,000

Total assets

$

4,452,385

$

4,308,011

Liabilities and Stockholders’ Equity

Current liabilities:

Current portion of debt

$

6,354

$

6,354

Current portion of acquisition-related liabilities

13,519

10,265

Accounts payable

152,285

120,813

Accrued expenses

150,154

160,570

Current operating lease liabilities

7,019

8,188

Billings in excess of costs and estimated earnings

12,524

16,499

Total current liabilities

341,855

322,689

Long-term debt

1,890,697

1,892,347

Acquisition-related liabilities

32,815

12,246

Tax receivable agreement liability

328,812

321,680

Noncurrent operating lease liabilities

22,316

21,500

Other noncurrent liabilities

140,968

121,281

Total liabilities

2,757,463

2,691,743

Stockholders’ equity:

Class A common stock, par value $0.01 per share; 1,000,000,000 shares authorized, 117,955,888 and 114,390,595 shares issued and outstanding as of July 3, 2021 and January 2, 2021, respectively

1,180

1,145

Class B common stock, par value $0.01 per share; 250,000,000 shares authorized, 99 shares issued and outstanding as of July 3, 2021 and January 2, 2021

—

—

Additional paid-in capital

1,313,414

1,264,681

Accumulated earnings

360,914

326,772

Accumulated other comprehensive income

8,866

5,203

Stockholders’ equity

1,684,374

1,597,801

Noncontrolling interest in Summit Holdings

10,548

18,467

Total stockholders’ equity

1,694,922

1,616,268

Total liabilities and stockholders’ equity

$

4,452,385

$

4,308,011

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows

($ in thousands)

Three months ended

July 3,

June 27,

2021

2020

Cash flow from operating activities:

Net income

$

34,513

$

12,161

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion, amortization and accretion

118,430

111,278

Share-based compensation expense

10,190

9,797

Net gain on asset and business disposals

(18,390

)

(4,131

)

Change in deferred tax asset, net

2,743

(8,175

)

Other

92

1,244

Decrease (increase) in operating assets, net of acquisitions and dispositions:

Accounts receivable, net

(60,829

)

(28,969

)

Inventories

(14,606

)

(27,391

)

Costs and estimated earnings in excess of billings

(21,475

)

(30,557

)

Other current assets

(3,925

)

654

Other assets

4,927

6,420

(Decrease) increase in operating liabilities, net of acquisitions and dispositions:

Accounts payable

26,858

15,410

Accrued expenses

(4,496

)

4,681

Billings in excess of costs and estimated earnings

(2,031

)

(1,253

)

Tax receivable agreement liability

7,132

993

Other liabilities

(4,482

)

(461

)

Net cash provided by operating activities

74,651

61,701

Cash flow from investing activities:

Acquisitions, net of cash acquired

(7,271

)

—

Purchases of property, plant and equipment

(132,723

)

(105,724

)

Proceeds from the sale of property, plant and equipment

6,806

6,607

Proceeds from sale of businesses

103,649

—

Other

(27

)

1,629

Net cash used in investing activities

(29,566

)

(97,488

)

Cash flow from financing activities:

Payments on debt

(17,433

)

(11,388

)

Payments on acquisition-related liabilities

(8,378

)

(9,703

)

Proceeds from stock option exercises

31,766

310

Other

(417

)

(907

)

Net cash provided by (used in) financing activities

5,538

(21,688

)

Impact of foreign currency on cash

293

(437

)

Net increase (decrease) in cash

50,916

(57,912

)

Cash and cash equivalents—beginning of period

418,181

311,319

Cash and cash equivalents—end of period

$

469,097

$

253,407

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Revenue Data by Segment and Line of Business

($ in thousands)

Three months ended

Six months ended

July 3,

June 27,

July 3,

June 27,

2021

2020

2021

2020

Segment Net Revenue:

West

$

313,617

$

299,024

$

548,361

$

483,516

East

219,091

200,554

342,159

320,543

Cement

85,822

75,662

126,491

113,587

Net Revenue

$

618,530

$

575,240

$

1,017,011

$

917,646

Line of Business – Net Revenue:

Materials

Aggregates

$

153,496

$

129,989

$

270,884

$

226,150

Cement (1)

82,169

73,293

120,308

106,156

Products

292,135

284,978

490,842

461,261

Total Materials and Products

527,800

488,260

882,034

793,567

Services

90,730

86,980

134,977

124,079

Net Revenue

$

618,530

$

575,240

$

1,017,011

$

917,646

Line of Business – Net Cost of Revenue:

Materials

Aggregates

$

67,734

$

54,942

$

136,031

$

114,465

Cement

41,672

34,894

79,032

71,549

Products

237,343

226,168

408,963

382,385

Total Materials and Products

346,749

316,004

624,026

568,399

Services

71,580

67,735

111,634

107,919

Net Cost of Revenue

$

418,329

$

383,739

$

735,660

$

676,318

Line of Business – Adjusted Cash Gross Profit (2):

Materials

Aggregates

$

85,762

$

75,047

$

134,853

$

111,685

Cement (3)

40,497

38,399

41,276

34,607

Products

54,792

58,810

81,879

78,876

Total Materials and Products

181,051

172,256

258,008

225,168

Services

19,150

19,245

23,343

16,160

Adjusted Cash Gross Profit

$

200,201

$

191,501

$

281,351

$

241,328

Adjusted Cash Gross Profit Margin (2)

Materials

Aggregates

55.9

%

57.7

%

49.8

%

49.4

%

Cement (3)

47.2

%

50.8

%

32.6

%

30.5

%

Products

18.8

%

20.6

%

16.7

%

17.1

%

Services

21.1

%

22.1

%

17.3

%

13.0

%

Total Adjusted Cash Gross Profit Margin

32.4

%

33.3

%

27.7

%

26.3

%

(1) Net revenue for the cement line of business excludes revenue associated with hazardous and non-hazardous waste, which is processed into fuel and used in the cement plants and is included in services net revenue. Additionally, net revenue from cement swaps and other cement-related products are included in products net revenue.

(2) Adjusted cash gross profit is calculated as net revenue by line of business less net cost of revenue by line of business. Adjusted cash gross profit margin is defined as adjusted cash gross profit divided by net revenue.

(3) The cement adjusted cash gross profit includes the earnings from the waste processing operations, cement swaps and other products. Cement line of business adjusted cash gross profit margin is defined as cement adjusted cash gross profit divided by cement segment net revenue.

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Volume and Price Statistics

(Units in thousands)

Three months ended

Six months ended

Total Volume

July 3, 2021

June 27, 2020

July 3, 2021

June 27, 2020

Aggregates (tons)

17,091

14,901

30,600

26,093

Cement (tons)

708

654

1,048

954

Ready-mix concrete (cubic yards)

1,534

1,443

2,872

2,686

Asphalt (tons)

1,557

1,755

2,031

2,163

Three months ended

Six months ended

Pricing

July 3, 2021

June 27, 2020

July 3, 2021

June 27, 2020

Aggregates (per ton)

$

11.39

$

11.12

$

11.06

$

11.00

Cement (per ton)

119.64

116.29

118.68

116.26

Ready-mix concrete (per cubic yards)

119.94

116.41

119.18

115.31

Asphalt (per ton)

59.87

59.48

59.91

58.99

Three months ended

Six months ended

Percentage Change in

Percentage Change in

Year over Year Comparison

Volume

Pricing

Volume

Pricing

Aggregates (per ton)

14.7

%

2.4

%

17.3

%

0.5

%

Cement (per ton)

8.3

%

2.9

%

9.9

%

2.1

%

Ready-mix concrete (per cubic yards)

6.3

%

3.0

%

6.9

%

3.4

%

Asphalt (per ton)

(11.3

)%

0.7

%

(6.1

)%

1.6

%

Three months ended

Six months ended

Percentage Change in

Percentage Change in

Year over Year Comparison (Excluding acquisitions)

Volume

Pricing

Volume

Pricing

Aggregates (per ton)

2.7

%

4.7

%

4.6

%

2.7

%

Cement (per ton)

8.3

%

2.9

%

9.9

%

2.1

%

Ready-mix concrete (per cubic yards)

6.3

%

3.0

%

6.9

%

3.4

%

Asphalt (per ton)

(11.3

)%

0.7

%

(6.1

)%

1.6

%

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Reconciliations of Gross Revenue to Net Revenue by Line of Business

($ and Units in thousands, except pricing information)

Three months ended July 3, 2021

Gross Revenue

Intercompany

Net

Volumes

Pricing

by Product

Elimination/Delivery

Revenue

Aggregates

17,091

$

11.39

$

194,595

$

(41,099

)

$

153,496

Cement

708

119.64

84,673

(2,504

)

82,169

Materials

$

279,268

$

(43,603

)

$

235,665

Ready-mix concrete

1,534

119.94

183,936

(75

)

183,861

Asphalt

1,557

59.87

93,246

(82

)

93,164

Other Products

103,259

(88,149

)

15,110

Products

$

380,441

$

(88,306

)

$

292,135

Six months ended July 3, 2021

Gross Revenue

Intercompany

Net

Volumes

Pricing

by Product

Elimination/Delivery

Revenue

Aggregates

30,600

$

11.06

$

338,389

$

(67,505

)

$

270,884

Cement

1,048

118.68

124,376

(4,068

)

120,308

Materials

$

462,765

$

(71,573

)

$

391,192

Ready-mix concrete

2,872

119.18

342,272

(178

)

342,094

Asphalt

2,031

59.91

121,667

(140

)

121,527

Other Products

177,141

(149,920

)

27,221

Products

$

641,080

$

(150,238

)

$

490,842

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Reconciliations of Non-GAAP Financial Measures

($ in thousands, except share and per share amounts)

The tables below reconcile our net income (loss) to Adjusted EBITDA by segment for the three and six months ended July 3, 2021 and June 27, 2020.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

Three months ended July 3, 2021

by Segment

West

East

Cement

Corporate

Consolidated

($ in thousands)

Net income (loss)

$

55,447

$

37,035

$

33,230

$

(67,954

)

$

57,758

Interest (income) expense

(2,860

)

(2,176

)

(4,035

)

33,287

24,216

Income tax expense

1,198

156

—

17,054

18,408

Depreciation, depletion and amortization

25,133

21,146

10,143

1,101

57,523

EBITDA

$

78,918

$

56,161

$

39,338

$

(16,512

)

$

157,905

Accretion

218

408

84

—

710

(Gain) loss on sale of businesses

(273

)

509

—

—

236

Non-cash compensation

—

—

—

4,827

4,827

Other

(92

)

206

—

—

114

Adjusted EBITDA

$

78,771

$

57,284

$

39,422

$

(11,685

)

$

163,792

Adjusted EBITDA Margin (1)

25.1

%

26.1

%

45.9

%

26.5

%

Reconciliation of Net Income (Loss) to Adjusted EBITDA

Three months ended June 27, 2020

by Segment

West

East

Cement

Corporate

Consolidated

($ in thousands)

Net income (loss)

$

57,040

$

32,206

$

29,386

$

(59,745

)

$

58,887

Interest (income) expense

(709

)

(433

)

(3,116

)

29,866

25,608

Income tax expense (benefit)

1,054

(36

)

—

16,163

17,181

Depreciation, depletion and amortization

22,050

21,014

9,291

992

53,347

EBITDA

$

79,435

$

52,751

$

35,561

$

(12,724

)

$

155,023

Accretion

115

380

86

—

581

Non-cash compensation

—

—

—

4,892

4,892

Other

(607

)

253

—

(229

)

(583

)

Adjusted EBITDA

$

78,943

$

53,384

$

35,647

$

(8,061

)

$

159,913

Adjusted EBITDA Margin (1)

26.4

%

26.6

%

47.1

%

27.8

%

Reconciliation of Net Income (Loss) to Adjusted EBITDA

Six months ended July 3, 2021

by Segment

West

East

Cement

Corporate

Consolidated

($ in thousands)

Net income (loss)

$

72,883

$

44,004

$

31,625

$

(113,999

)

$

34,513

Interest (income) expense

(4,892

)

(3,896

)

(8,080

)

65,270

48,402

Income tax expense

1,384

90

—

11,491

12,965

Depreciation, depletion and amortization

50,057

42,620

18,211

2,205

113,093

EBITDA

$

119,432

$

82,818

$

41,756

$

(35,033

)

$

208,973

Accretion

434

877

165

—

1,476

Gain on sale of businesses

(273

)

(15,159

)

—

—

(15,432

)

Non-cash compensation

—

—

—

10,190

10,190

Other

(174

)

493

—

—

319

Adjusted EBITDA

$

119,419

$

69,029

$

41,921

$

(24,843

)

$

205,526

Adjusted EBITDA Margin (1)

21.8

%

20.2

%

33.1

%

20.2

%

Reconciliation of Net Income (Loss) to Adjusted EBITDA

Six months ended June 27, 2020

by Segment

West

East

Cement

Corporate

Consolidated

($ in thousands)

Net income (loss)

$

57,538

$

21,139

$

17,108

$

(83,624

)

$

12,161

Interest (income) expense

(1,287

)

(1,002

)

(6,292

)

62,007

53,426

Income tax expense (benefit)

587

(165

)

—

(6,142

)

(5,720

)

Depreciation, depletion and amortization

43,734

41,734

17,099

1,981

104,548

EBITDA

$

100,572

$

61,706

$

27,915

$

(25,778

)

$

164,415

Accretion

231

756

171

—

1,158

Non-cash compensation

—

—

—

9,797

9,797

Other

608

495

—

(899

)

204

Adjusted EBITDA

$

101,411

$

62,957

$

28,086

$

(16,880

)

$

175,574

Adjusted EBITDA Margin (1)

21.0

%

19.6

%

24.7

%

19.1

%

(1) Adjusted EBITDA Margin is defined as Adjusted EBITDA as a percentage of net revenue.

The table below reconciles our net income attributable to Summit Materials, Inc. to adjusted diluted net income per share for the three and six months ended July 3, 2021 and June 27, 2020. The per share amount of the net income attributable to Summit Materials, Inc. presented in the table is calculated using the total equity interests for the purpose of reconciling to adjusted diluted net income per share.

Three months ended

Six months ended

July 3, 2021

June 27, 2020

July 3, 2021

June 27, 2020

Reconciliation of Net Income Per Share to Adjusted Diluted EPS

Net Income

Per Equity Unit

Net Income

Per Equity Unit

Net Income

Per Equity Unit

Net Income

Per Equity Unit

Net income attributable to Summit Materials, Inc.

$

56,659

$

0.47

$

57,064

$

0.49

$

34,142

$

0.29

$

12,085

$

0.10

Adjustments:

Net income attributable to noncontrolling interest

1,099

0.02

1,823

0.01

371

—

76

—

Loss (gain) on sale of businesses

236

—

—

—

(15,432

)

(0.13

)

—

—

Adjusted diluted net income before tax related adjustments

57,994

0.49

58,887

0.50

19,081

0.16

12,161

0.10

Changes in unrecognized tax expense (benefit)

—

—

—

—

—

—

(9,537

)

(0.08

)

Adjusted diluted net income

$

57,994

$

0.49

$

58,887

$

0.50

$

19,081

$

0.16

$

2,624

$

0.02

Weighted-average shares:

Basic Class A common stock

117,436,461

114,111,204

116,423,833

113,856,657

LP Units outstanding

1,885,789

3,053,115

2,249,499

3,103,672

Total equity units

119,322,250

117,164,319

118,673,332

116,960,329

The following table reconciles operating income to Adjusted Cash Gross Profit and Adjusted Cash Gross Profit Margin for the three and six months ended July 3, 2021 and June 27, 2020.

Three months ended

Six months ended

July 3,

June 27,

July 3,

June 27,

Reconciliation of Operating Income to Adjusted Cash Gross Profit

2021

2020

2021

2020

($ in thousands)

Operating income

$

95,923

$

100,060

$

70,864

$

58,340

General and administrative expenses

47,448

39,727

99,090

81,413

Depreciation, depletion, amortization and accretion

58,233

53,928

114,569

105,706

Gain on sale of property, plant and equipment

(1,403

)

(2,214

)

(3,172

)

(4,131

)

Adjusted Cash Gross Profit (exclusive of items shown separately)

$

200,201

$

191,501

$

281,351

$

241,328

Adjusted Cash Gross Profit Margin (exclusive of items shown separately) (1)

32.4

%

33.3

%

27.7

%

26.3

%

(1) Adjusted Cash Gross Profit Margin is defined as Adjusted Cash Gross Profit as a percentage of net revenue.

The following table reconciles net cash provided by operating activities to free cash flow for the three and six months ended July 3, 2021 and June 27, 2020.

Three months ended

Six months ended

July 3,

June 27,

July 3,

June 27,

($ in thousands)

2021

2020

2021

2020

Net income

$

57,758

$

58,887

$

34,513

$

12,161

Non-cash items

74,221

74,346

113,065

110,013

Net income adjusted for non-cash items

131,979

133,233

147,578

122,174

Change in working capital accounts

(36,010

)

(32,601

)

(72,927

)

(60,473

)

Net cash provided by operating activities

95,969

100,632

74,651

61,701

Capital expenditures, net of asset sales

(58,823

)

(40,448

)

(125,917

)

(99,117

)

Free cash flow

$

37,146

$

60,184

$

(51,266

)

$

(37,416

)

View source version on businesswire.com: https://www.businesswire.com/news/home/20210804006014/en/

Karli Anderson

EVP, Chief Environmental, Social & Governance Officer and Head of Investor Relations

[email protected]

303-875-3886

KEYWORDS: United States North America Colorado

INDUSTRY KEYWORDS: Engineering Transportation Health Travel Manufacturing Other Transport Other Construction & Property Construction & Property Transport Other Natural Resources Mining/Minerals Natural Resources Other Manufacturing Logistics/Supply Chain Management

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Posted on August 4, 2021 4:19 pm
Abiomed Announces Record Revenue of $253 Million, Up 53% Year Over Year

Abiomed Announces Record Revenue of $253 Million, Up 53% Year Over Year

Full year global revenue guidance increased for fiscal year 2022 to 22% – 24% growth versus prior year

DANVERS, Mass.–(BUSINESS WIRE)–
Abiomed, Inc. (NASDAQ: ABMD), a leading provider of breakthrough heart support technologies, today announced financial results for the quarter ended June 30, 2021.

Q1 financial summary and operational highlights:

Total revenue for the quarter totaled $252.6 million, an increase of 53% compared to $164.9 million during the same period of the prior fiscal year, driven by record global patient utilization with COVID recovery.

Worldwide Impella® heart pump product revenue for the quarter totaled $241.5 million, an increase of 55% compared to $155.4 million during the same period of the prior fiscal year.

U.S. Impella product revenue for the quarter totaled $197.5 million, an increase of 56% compared to $126.2 million during the same period of the prior fiscal year, with U.S. patient usage of Impella heart pumps up 43%.

Outside the U.S., Impella product revenue for the quarter totaled $44.0 million, an increase of 51% compared to $29.2 million during the same period of the prior fiscal year. Specifically, Japan product revenue for the quarter totaled $10.9 million, an increase of 24% compared to $8.8 million during the same period of the prior fiscal year, driven by a 78% increase in patient usage.

Gross margin for the quarter was 82.1% compared to 78.2% during the same period of the prior fiscal year.

The company announced the acquisition of the remaining interest of preCARDIA for $82.8 million. preCARDIA is the developer of a proprietary catheter and controller that will complement Abiomed’s product portfolio to expand options for upstream heart failure patients acutely decompensating. Annually, more than one million patients are admitted to hospitals in the United States with acute decompensated heart failure (ADHF)¹. Despite available pharmaceutical treatments, heart failure is the leading cause of hospitalization in patients older than 65 years of age². preCARDIA will provide heart failure specialists a minimally invasive solution with the potential to improve patient outcomes and lower the cost of care by providing early intervention with this new technology.

Non-GAAP income from operations* increased 94% to $66.2 million, or 26.2% non-GAAP operating margin* for the quarter, compared to $34.1 million non-GAAP income from operations, or 20.7% GAAP operating margin during the same period of the prior fiscal year. GAAP loss from operations for the quarter was $49.3 million, or (19.5%) GAAP operating margin primarily due to the accounting for the preCARDIA acquisition.

Non-GAAP net income* increased 95% to $51.1 million, or $1.10 per diluted share, compared to non-GAAP net income of $26.1, or $0.58 per diluted share during the same period of the prior fiscal year. GAAP net loss for the quarter was $26.5 million, or $(0.59) per diluted share compared to GAAP net income of $44.6 million, or $0.98 per diluted share during the same period of the prior fiscal year primarily due to the accounting for the preCARDIA acquisition.

The company generated operating cash flows of $55.4 million during the quarter. As of June 30, 2021, the company had $804.8 million of cash and cash equivalents and marketable securities and no debt.

On June 29, the company announced Impella RP with SmartAssist received U.S. Food and Drug Administration (FDA) pre-market approval (PMA) as safe and effective to treat acute right heart failure for up to 14 days. Impella RP with SmartAssist is the first single-access temporary percutaneous ventricular support device with sensor technology. The FDA issued an emergency use authorization (EUA) for Impella RP in June 2020 to include patients suffering from COVID-19 related right heart failure or decompensation, including pulmonary embolism (PE). Since the onset of the COVID-19 pandemic, Impella RP has become a therapeutic choice for clinicians treating certain COVID-19 patients suffering right heart failure.

On August 2, the Centers for Medicare and Medicaid Services (CMS) released final Medicare payment levels for inpatient hospital discharges for fiscal year 2022 which takes effect October 1, 2021. Consistent with the April 2021 proposal and the Form 8-K filed with the SEC, CMS will reassign select ICD-10-PCS codes from MS-DRG 215 to additional cardiovascular related MS-DRGs to align clinical populations and better reflect hospital resources. We are pleased and supported the final rule coding changes to provide stability for multiple DRG payments. The Final Rule for the Inpatient Prospective Payment System (IPPS) is available on the CMS website.

“Q1 was a solid start with record global revenue and patient utilization in US, Europe and Japan, and we believe we are well-positioned for success in FY22,” said Michael R. Minogue, Abiomed’s Chairman, President and Chief Executive Officer. “We will continue to create and deliver value by successfully advancing our innovation, clinical research and commercial distribution. We remain steadfast to creating the field of heart recovery and driving a new standard of care for circulatory support.”

FISCAL YEAR 2022 OUTLOOK

The company is increasing fiscal year 2022 global revenue and now expects it to be in the range of $1,030 million to $1,050 million, representing 22% to 24% growth compared to fiscal year 2021, an increase from our original guidance of $990 million to $1,030 million, or 17% to 22% growth compared to fiscal year 2021. The company expects its fiscal year 2022 non-GAAP operating margin* to be in the range of 24% to 26%.

*ABOUT NON-GAAP FINANCIAL MEASURES

To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States (“GAAP”), the company uses non-GAAP financial measures as described below. The company uses these non-GAAP financial measures for financial and operational decision-making and to evaluate period-to-period comparisons. The company believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity. The company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning, forecasting, and analyzing future periods. The company believes these non-GAAP financial measures are useful to investors because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by institutional investors and the analyst community to help them analyze the performance of the company’s business.

The company uses the following non-GAAP financial measures:

Non-GAAP (loss) income from operations: The company defines non-GAAP (loss) income from operations as (loss) income from operations, excluding the charge for the acquired in-process research and development related to the preCARDIA acquisition.

Non-GAAP operating margin: The company defines non-GAAP operating margin as operating margin, excluding the charge for the acquired in-process research and development related to the preCARDIA acquisition.

Non-GAAP net (loss) income and net (loss) income per diluted share: The company defines non-GAAP net (loss) income and net (loss) income per diluted share as net (loss) income and net (loss) income per diluted share, excluding the charge for the acquired in-process research and development related to the preCARDIA acquisition, the gain recognized on its previously owned minority interest in preCARDIA, the unrealized gain on investment in Shockwave Medical and excess tax benefits associated with stock-based compensation. The company defines non-GAAP EPS as non-GAAP net (loss) income divided by non-GAAP diluted shares, which are calculated as GAAP weighted average outstanding shares plus dilutive potential shares outstanding during the period.

Refer to the “Reconciliation of GAAP to Non-GAAP Financial Measures” section of this press release.

The company reports non-GAAP financial measures in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles, differ from GAAP measures with the same names, and may differ from non-GAAP financial measures with the same or similar names that are used by other companies. The company believes it is useful to exclude certain items because such amounts in any specific period may not directly correlate to the underlying performance of its business operations or can vary significantly between periods. The company believes that non-GAAP financial measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP financial measures. The company encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the reconciliations between these presentations, to more fully understand its business.

EARNINGS CONFERENCE CALL DETAILS

The company will host a conference call to discuss the quarterly results at 8:00 a.m. ET on Thursday, August 5, 2021. The conference call will be hosted by Michael R. Minogue, Chairman, President and Chief Executive Officer and Todd A. Trapp, Vice President and Chief Financial Officer.

To listen to the call live, please tune into the webcast via https://investors.abiomed.com/events-presentations or dial (855) 212-2361; the international number is (678) 809-1538. A replay of this conference call will be available beginning at 11:00 a.m. ET August 5, 2021 through 11:00 a.m. ET on August 12, 2021. The replay phone number is (855) 859-2056; the international number is (404) 537-3406. The replay access code is 5929017.

ABOUT ABIOMED

Based in Danvers, Massachusetts, USA, Abiomed, Inc. is a leading provider of medical devices that provide circulatory support and oxygenation. Our products are designed to enable the heart to rest by improving blood flow and/or performing the pumping of the heart. For additional information, please visit: www.abiomed.com. Abiomed, Impella, Impella 2.5, Impella 5.0, Impella LD, Impella CP, Impella RP, Impella 5.5, Impella Connect, and SmartAssist are registered trademarks of Abiomed, Inc., and are registered in the U.S. and certain foreign countries. Impella ECP, Impella XR Sheath, Impella BTR, CVAD, STEMI DTU, Automated Impella Controller and Abiomed Breethe OXY-1 System are pending trademarks of Abiomed, Inc.

FORWARD-LOOKING STATEMENTS

This release contains forward-looking statements, including, without limitation, statements regarding development of Abiomed’s existing and new products, the company’s progress toward commercial growth, future opportunities and expected regulatory approvals and statements in the paragraph under “Fiscal Year 2022 Outlook” section regarding certain business metrics on either or both a GAAP or non-GAAP basis. All statements, other than statements of historical facts, may be forward-looking statements. These forward-looking statements may be accompanied by such words as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “target,” “should,” “likely,” “will” and other words and terms of similar meaning. The company’s actual results may differ materially from those anticipated in these forward-looking statements based upon a number of factors, including, without limitation: the scope, scale and duration of the impact of the COVID-19 pandemic, the company’s dependence on Impella® products for all of its revenues; the company’s ability to successfully compete against its existing or potential competitors; the acceptance of the company’s products by cardiac surgeons and interventional cardiologists; long sales and training cycles associated with expansion into new hospital cardiac centers; reduced market acceptance of the company’s products due to lengthy clinician training process; the company’s ability to effectively manage its growth; the company’s ability to successfully commercialize its products; the company’s ability to obtain regulatory approvals and market and sell its products in certain jurisdictions; enforcement actions and product liability suits relating to off-label uses of the company’s products; unsuccessful clinical trials or procedures relating to products under development; the company’s ability to maintain compliance with regulatory requirements; the failure of third-party payers to provide reimbursement of the company’s products; the company’s ability to increase manufacturing capacity to support continued demand for its products; the company or its vendors’ failure to achieve and maintain high manufacturing standards; the failure of the company’s suppliers to provide the components the company requires; the company’s ability to expand its direct sales activities into international markets; the outcome of ongoing securities class action litigation relating to our public disclosures, the company’s ability to integrate acquired companies into its operations and other risks and challenges detailed in the company’s filings with the Securities and Exchange Commission (the “SEC”), including the most recently filed Annual Report on Form 10-K and the filings subsequently filed with or furnished to the SEC. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this release. Unless otherwise required by law, the company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances that occur after the date of this release or to reflect the occurrence of unanticipated events.

Abiomed, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share data)

June 30, 2021

March 31, 2021

ASSETS

Current assets:

Cash and cash equivalents

$

175,454

$

232,710

Short-term marketable securities

347,577

350,985

Accounts receivable, net

88,645

97,179

Inventories

83,661

81,059

Prepaid expenses and other current assets

34,536

26,032

Total current assets

729,873

787,965

Long-term marketable securities

281,776

264,085

Property and equipment, net

198,234

197,129

Goodwill

79,006

78,568

Other intangibles, net

41,904

42,150

Deferred tax assets

4,958

11,380

Other assets

122,643

113,082

Total assets

$

1,458,394

$

1,494,359

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

29,807

$

34,842

Accrued expenses

56,462

66,046

Deferred revenues

24,094

24,322

Other current liabilities

2,760

3,759

Total current liabilities

113,123

128,969

Other long-term liabilities

11,314

10,162

Contingent consideration

25,577

24,706

Deferred tax liabilities

858

847

Total liabilities

150,872

164,684

Commitments and contingencies

Stockholders’ equity:

Class B Preferred Stock, $.01 par value

—

—

Authorized – 1,000,000 shares; Issued and outstanding – none

Common stock, $.01 par value

454

453

Authorized – 100,000,000 shares; Issued 48,070, 443 shares as of June 30, 2021 and 47,929,402 shares as of March 31, 2021

Outstanding 45,377,715 shares as of June 30, 2021 and 45,270,948 shares as of March 31, 2021

Additional paid in capital

815,416

800,690

Retained earnings

801,482

828,007

Treasury stock at cost 2,692,728 shares as of June 30, 2021 and 2,658,454 shares as of March 31, 2021

(297,619

)

(288,030

)

Accumulated other comprehensive loss

(12,211

)

(11,445

)

Total stockholders’ equity

1,307,522

1,329,675

Total liabilities and stockholders’ equity

$

1,458,394

$

1,494,359

Abiomed, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share data)

For the Three Months Ended June 30,

2021

2020

Revenue

$

252,585

$

164,850

Costs and expenses:

Cost of revenue

45,188

35,983

Research and development

37,708

26,357

Selling, general and administrative

103,484

68,444

Acquired in-process research and development

115,490

—

301,870

130,784

(Loss) income from operations

(49,285

)

34,066

Other income:

Investment income, net

1,050

2,397

Other income, net

38,885

24,613

39,935

27,010

(Loss) income before income taxes

(9,350

)

61,076

Income tax provision

17,175

16,488

Net (loss) income

$

(26,525

)

$

44,588

Net (loss) income per share – basic

$

(0.59

)

$

0.99

Weighted average shares outstanding – basic

45,311

45,010

Net (loss) income per share – diluted

$

(0.59

)

$

0.98

Weighted average shares outstanding – diluted

45,311

45,549

Abiomed, Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

(in thousands, except per share data)

For the Three Months Ended June 30,

2021

2020

GAAP (loss) income from operations

$

(49,285

)

$

34,066

Acquired in-process research and development (1)

115,490

—

Non-GAAP income from operations

$

66,205

$

34,066

GAAP operating margin

(19.5

%)

20.7

%

Non-GAAP operating margin

26.2

%

20.7

%

GAAP net (loss) income

$

(26,525

)

$

44,588

Acquired in-process research and development (1)

115,490

—

Gain on previously held interest in preCARDIA (2)

(20,980

)

—

Excess tax benefits on stock-based compensation (3)

(3,630

)

(522

)

Gain on investment in Shockwave Medical (4)

(13,301

)

(17,934

)

Non-GAAP net income

$

51,054

$

26,132

GAAP diluted net (loss) income per share

$

(0.59

)

$

0.98

Acquired in-process research and development (1)

2.52

—

Gain on previously held interest in preCARDIA (2)

(0.46

)

—

Excess tax benefits on stock-based compensation (3)

(0.08

)

(0.01

)

Gain on investment in Shockwave Medical (4)

(0.29

)

(0.39

)

Non-GAAP diluted net income per share

$

1.10

$

0.58

GAAP diluted weighted-average shares outstanding

45,311

45,549

Non-GAAP diluted weighted-average shares outstanding

45,797

45,549

Notes:

(1) In May 2021, the company acquired the remaining interest in preCARDIA for $82.8 million. The company determined that substantially all of the fair value of the acquisition related to the acquired in-process research and development asset, which resulted in accounting for the transaction as an asset acquisition. The fair value of the acquired in-process research and development asset of $115.5 million is primarily comprised of the net consideration paid for the acquired remaining interest of $82.8 million and our previously owned minority interest in preCARDIA of $32.4 million. Since the acquired technology platform is pre-commercial and has not reached technical feasibility as defined by the accounting rules, the cost of the in-process research and development asset was expensed in the quarter, resulting in a charge of $115.5 million for the three months ended June 30, 2021.

(2) The company recognized a gain of $21.0 million related to its previously owned minority interest in preCARDIA as described in note (1), within the condensed consolidated statement of operations for the three months ended June 30, 2021.

(3) Amount represents the impact of excess tax benefits associated with stock-based compensation in each respective period presented. The company recognized excess tax benefits associated with stock-based compensation of $3.6 million and $0.5 million as an income tax benefit for the three months ended June 30, 2021 and 2020, respectively.

(4) Amount represents the unrealized gain on investment in Shockwave Medical in each respective period presented. The company recognized an unrealized gain on investment in Shockwave Medical of $17.7 million ($13.3 million, net of tax benefit) and $23.9 million ($17.9 million, net of tax benefit) within other income for the three months ended June 30, 2021 and 2020, respectively.

Refer to “About Non-GAAP Financial Measures” section of this press release.

¹ Ponikowski, et al., ESC Heart Fail. 2014 Sep;1(1):4-25.

² Olofsson, et al., Journal of Clinical Gerontology and Geriatrics, Volume 7, Issue 2, 2016, Pages 53-59

View source version on businesswire.com: https://www.businesswire.com/news/home/20210804006013/en/

Todd Trapp

Vice President and Chief Financial Officer

978-646-1680

[email protected]

Tom Langford

Director, Corporate Communications & PR

978-882-8408

[email protected]

KEYWORDS: United States North America Massachusetts

INDUSTRY KEYWORDS: Health Medical Devices Cardiology

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Posted on August 4, 2021 4:19 pm
Five Star Senior Living Inc. Announces Second Quarter 2021 Results

Five Star Senior Living Inc. Announces Second Quarter 2021 Results

Owned and Leased Communities Sequential Spot Occupancy Growth of 150 Basis Points

Executed on Strategic Plan by Closing 1,473 Skilled Nursing Facility Units During the Second Quarter

Agreements in Place to Transition Management of 76 Senior Living Communities with Approximately 5,200 Living Units to New Operators Throughout Remainder of 2021

Reported $99.3 Million of Unrestricted Cash and Cash Equivalents

NEWTON, Mass.–(BUSINESS WIRE)–Five Star Senior Living Inc. (Nasdaq: FVE) today announced its financial results for the three months ended June 30, 2021.

Katherine Potter, President and Chief Executive Officer, made the following statement:

“During the second quarter, Five Star executed on our Strategic Plan to transform our business to better address the changing needs and preferences of a growing and aging adult population and position Five Star for long term growth. This quarter we closed 1,473 skilled nursing facility units and a corresponding 27 Ageility inpatient clinics. While all the Ageility inpatient clinics will be closed as part of the Strategic Plan, we remain focused on expanding Ageility’s reach and, during the quarter, we opened three net new Ageility outpatient clinics. As of July 31, 2021, Diversified Healthcare Trust has reached agreement to transition the management of 76 of 108 transitioning senior living communities managed by Five Star to new operators. I greatly appreciate the contributions of our residents, clients and team to this transition.

Resident vaccination levels have increased throughout our senior living portfolio, while confirmed resident COVID-19 cases have declined to pandemic lows. We remain on target to vaccinate all community team members by September 1, 2021, which we believe is essential to ensuring the safety and well-being of our residents, team members and clients. In addition, as of July 31, 2021, the 120 communities that we will continue to manage for DHC have regained 140 basis points of occupancy from pandemic lows to 73.8%. We are building momentum toward a sustained recovery by welcoming new residents and clients to our communities and clinics and embracing the return to our full resident, client and team member experience.”

Second Quarter Highlights:

Net loss for the second quarter of 2021 was $12.3 million, or $0.39 per share, which included $15.4 million of expenses related to our restructuring, partially offset by $11.5 million to be reimbursed by Diversified Healthcare Trust, or DHC, related to the new strategic plan announced by FVE on April 9, 2021, or the Strategic Plan, compared to net income of $3.0 million, or $0.10 per share, for the second quarter of 2020.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the second quarter of 2021 was $(8.8) million compared to $5.0 million for the second quarter of 2020. Adjusted EBITDA, as described further below, was $(4.5) million for the second quarter of 2021 compared to $7.1 million for the second quarter of 2020. EBITDA and Adjusted EBITDA are non-GAAP financial measures. Reconciliations of net loss determined in accordance with GAAP to EBITDA and Adjusted EBITDA for the second quarter of 2021 and 2020 are presented later in this press release.

The following tables present data on the senior living communities that FVE owns, leases and manages as well as our Ageility rehabilitation clinics, and our comparable community data.

As of and for the Three Months Ended

June 30, 2021

March 31, 2021

June 30, 2020

Senior Living Segment:

Spot Occupancy

Owned and Leased

69.7

%

68.2

%

76.3

%

Managed

71.3

%

70.2

%

77.5

%

Comparable Communities ⁽¹⁾

Spot Occupancy

Owned and Leased

69.7

%

68.6

%

76.6

%

Managed

73.3

%

73.2

%

81.1

%

Operating Margin ^{(2) (3)}

Owned and Leased

(16.2

)%

(13.3

)%

(1.2

)%

Managed

10.1

%

8.9

%

19.8

%

As of and for the Three Months Ended

June 30, 2021

March 31, 2021

June 30, 2020

Ageility:

Number of Clinics

Inpatient ⁽³⁾

10

37

40

Outpatient

218

215

206

Number of Visits (in thousands)

Inpatient ⁽³⁾

36

72

84

Outpatient

156

149

139

Comparable Clinics ⁽⁴⁾

Average revenue per clinic

$

71

$

68

$

66

Operating margin ⁽³⁾

12.3

%

14.4

%

12.1

%

_______________________________________

⁽¹⁾

Comparable communities provides data for 23 owned and leased senior living communities and 120 managed senior living communities that FVE continuously owned, leased or managed since April 1, 2020, exclusive of 108 senior living communities with approximately 7,500 living units, that FVE currently manages on behalf of DHC that are expected to be transitioned to new operators and approximately 1,500 skilled nursing facility, or SNF, units which have been or are expected to be closed and repositioned in 27 Continuing Care Retirement Communities, or CCRCs, that FVE will continue to manage. It also excludes one community leased by FVE with 51 living units, which has been out of service due to a fire on April 4, 2021.

⁽²⁾

Operating margin is defined as operating revenue less operating expenses incurred by the business unit divided by operating revenue. It is exclusive of Provider Relief Funds from the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, and other governmental grants recognized as other income. It is inclusive of approximately 1,500 SNF units, which have been or are expected to be closed and repositioned, in 27 CCRCs that FVE will continue to manage. In addition, it excludes Restructuring Expenses for the three months ended June 30, 2021 of $10.2 million for the comparable managed communities.

⁽³⁾

All Ageility inpatient clinics will be closed as part of the Strategic Plan. During the three months ended June 30, 2021, 27 inpatient clinics were closed as part of the Strategic Plan.

⁽⁴⁾

Comparable clinics includes financial data for 195 Ageility outpatient clinics that FVE continuously owned and operated since April 1, 2020 and excludes data for 27 Ageility inpatient clinics that were closed during the three months ended June 30, 2021 and an additional ten Ageility inpatient clinics that are expected to be closed during 2021.

Strategic Plan

On April 9, 2021, FVE announced our Strategic Plan, including to:

Reposition the senior living management service offering to focus on larger independent living, assisted living and memory care communities, as well as stand-alone independent living and active adult communities; and exit skilled nursing,

Evolve through the enhanced scalable shared service center to support operations and growth, the development and delivery of differentiated, customer focused resident experiences,

Diversify with a focus on revenue diversification opportunities, including growing Ageility rehabilitation services and expanding ancillary services to provide choice based, financially flexible, resident experience and reach customers outside of FVE’s senior living communities.

During the three months ended June 30, 2021, FVE made the following progress with respect to the Strategic Plan:

Amended its management arrangements with DHC on June 9, 2021.

Closed as of June 30, 2021, 1,473 of the approximately 1,500 SNF living units planned for closure in 26 of the 27 CCRCs and is in the process of repositioning these SNF living units.

Closed as of June 30, 2021, 27 of the planned 37 Ageility inpatient rehabilitation clinics.

In July 2021, DHC entered into agreements to transition the management of 76 of the 108 transitioning senior living communities (approximately 5,200 living units) to new operators in 2021.

In connection with the implementation of our Strategic Plan, FVE expects to incur restructuring expenses of up to $20.5 million, approximately $15.0 million of which FVE expects DHC will reimburse. These expenses are expected to include up to $7.5 million of retention bonus payments, up to $10.2 million of severance, benefits and transition expenses, and up to $2.8 million of transaction expenses, of which FVE expects DHC to reimburse approximately $5.9 million, $7.5 million and $1.6 million, respectively. In the three months ended June 30, 2021, FVE recorded expenses of $15.4 million, of which $11.5 million will be reimbursed by DHC.

Presented below is a summary of the units FVE operated (owned, leased and managed) as of June 30, 2021 and the projected number of units to be operated after the conclusion of the Strategic Plan:

As of June 30, 2021

Retained

Units ⁽¹⁾

Units ⁽²⁾⁽³⁾

Independent living

10,979

10,421

Assisted living

12,023

7,854

Memory care

3,247

1,874

Skilled nursing

1,484

—

Total

27,733

20,149

_______________________________________

⁽¹⁾

The units operated as of June 30, 2021 include 2,099 owned, 152 leased, and 25,482 managed.

⁽²⁾

Includes 2,099 owned, 152 leased, and 17,898 managed units.

⁽³⁾

Excludes one community leased by FVE with 51 living units, which has been out of service due to a fire on April 4, 2021.

Presented below is a summary of the communities, units, average occupancy, spot occupancy, revenues and management fees for the communities FVE manages for DHC as of and for the three months ended June 30, 2021 and for the retained communities to be managed for DHC after the conclusion of the Strategic Plan (dollars in thousands):

As of and for the Three Months Ended June 30, 2021

Communities

Units

Average Occupancy

Spot Occupancy

Community Revenues ⁽¹⁾

Management Fees ⁽²⁾

Independent and assisted living communities ⁽⁴⁾

209

22,980

70.0

%

71.9

%

$

149,998

$

8,011

Continuing care retirement communities ⁽⁴⁾

10

1,547

69.1

%

66.3

%

77,637

4,097

Skilled nursing facilities

9

955

65.2

%

66.2

%

16,312

819

Total

228

25,482

69.5

%

71.3

%

$

243,947

$

12,927

Retained

Communities

Units

Average Occupancy

Spot Occupancy

Community Revenues ⁽¹⁾

Management Fees ⁽³⁾

Independent and assisted living communities ⁽⁴⁾

120

17,898

72.9

%

73.3

%

$

159,014

$

8,552

Continuing care retirement communities

—

—

—

%

—

%

—

—

Skilled nursing facilities

—

—

—

%

—

%

—

—

Total

120

17,898

72.9

%

73.3

%

$

159,014

$

8,552

_______________________________________

⁽¹⁾

Represents the revenues of the senior living communities FVE manages on behalf of DHC. Managed senior living communities’ revenues do not represent FVE’s revenues and are included to provide supplemental information regarding the operating results and financial condition of the communities from which FVE earns management fees.

⁽²⁾

The 1,473 SNF units in 26 CCRCs that were closed in the three months ended June 30, 2021, and are to be repositioned, had management fee revenue of $458 for the three months ended June 30, 2021.

⁽³⁾

Excludes management fee revenue of $4,378 for the three months ended June 30, 2021 related to (i) 108 senior living communities managed on behalf of DHC, with approximately 7,500 living units that are expected to be transitioned to new operators (ii) 1,473 SNF units in 26 CCRCs that were closed during the three months ended June 30, 2021 and are in the process of being repositioned and (iii) an additional 59 SNF units that are expected to be closed and repositioned in one CCRC during the remainder of 2021 that FVE will continue to manage for DHC.

⁽⁴⁾

During the three months ended June 30, 2021 FVE closed 1,473 SNF units in 26 CCRCs. Due to these SNF unit closures, these communities are no longer CCRCs and have been included in the community and unit totals and spot occupancy as independent and assisted living communities as of June 30, 2021. However, average occupancy, community revenues and management fees for those 26 CCRCs are included in the CCRC totals for the three months ended June 30, 2021. The average occupancy, community revenues and management fees for these communities for the three months ended June 30, 2021 were 69.7%, $56,408 and $3,007, respectively.

Following the implementation of the Strategic Plan, FVE will continue to manage 120 senior living communities for DHC, representing 17,898 living units and approximately 65% of FVE’s management fee revenues for the three months ended June 30, 2021, and to operate its existing owned portfolio of 20 communities with approximately 2,100 living units. FVE expects to partially offset the resulting revenue loss from fees we earn from the 108 transitioning senior living communities with expense reductions to right-size operations.

The 120 senior living communities that FVE will continue to manage for DHC after the Transition outperformed the total DHC managed portfolio (exclusive of the closed and pending closing and repositioning of approximately 1,500 SNF units in 27 of the CCRCs) for the three months ended June 30, 2021 with approximately 270 basis points higher operating margin.

In addition to the Transition of 108 managed communities owned by DHC, the landlord of our four leased senior living communities with approximately 200 living units is currently marketing these properties for sale and FVE is unlikely to operate those communities long-term. One of these leased communities with 51 living units has been out of service due to a fire on April 4, 2021.

Presented below is a summary of FVE’s Ageility rehabilitation clinics as of June 30, 2021 and the number of clinics to be operated after the implementation of the Strategic Plan (dollars in thousands):

As of and for the

Three Months Ended June 30, 2021

Retained

Number of Clinics

Total Revenue ⁽³⁾

Average Revenue per Clinic

Adjusted EBITDA Margin

Number of Clinics

Total Revenue ⁽¹⁾⁽³⁾

Average Revenue per Clinic

Adjusted EBITDA Margin

Inpatient Clinics in DHC Communities

10

$

2,630

$

n/m

4.8

%

—

$

—

$

—

—

%

Outpatient Clinics in DHC Communities

91

8,354

92

13.3

%

91

8,354

92

13.3

%

Outpatient Clinics in Transition Communities⁽²⁾

44

1,919

44

17.1

%

44

1,919

44

17.1

%

Total Clinics at DHC Communities

145

12,903

89

12.1

%

135

10,273

76

14.0

%

Outpatient Clinics at Other Communities⁽⁴⁾

83

4,242

51

8.5

%

83

4,242

51

8.5

%

Total Clinics

228

$

17,145

$

75

11.2

%

218

$

14,515

$

67

12.4

%

_______________________________________

n/m – not meaningful, as the revenues represent revenue earned from 37 inpatient clinics but at June 30, 2021 there were only ten inpatient clinics

⁽¹⁾

Excludes revenue of $2,630 for the three months ended June 30, 2021 for 27 Ageility inpatient clinics that were closed during the three months ended June 30, 2021 and an additional ten Ageility inpatient clinics, which are expected to be closed during the remainder of 2021 as part of the Transition.

⁽²⁾

As part of the Transition, FVE expects 108 senior living communities managed on behalf of DHC to be transitioned to new operators. These communities have 44 Ageility outpatient rehabilitation clinics, which, due to the transfer to a new operator, may be subject to closure by the new operator.

⁽³⁾

Total Ageility revenue excludes home health care services, which are a part of the rehabilitation and wellness services segment.

⁽⁴⁾

Other communities includes outpatient clinics at non-FVE operated or managed communities and 16 outpatient clinics at communities FVE owns.

FVE expects the rehabilitation and wellness services segment to grow and diversify through our expanded emphasis on fitness and home health care services. Fitness offerings started as an extension of FVE’s rehabilitation product and, while representing only 4.7% of segment revenues for the three months ended June 30, 2021, fitness revenues increased by 56.0% to $0.8 million when compared to the same period in 2020.

FVE currently expects to continue to evolve and diversify through growth of our ancillary rehabilitation and wellness service offerings, including rehabilitation and wellness services, by opening new clinics and expanding our fitness and other home-based service offerings within and outside of its senior living communities. Since January 1, 2019, FVE has opened 89 net new outpatient rehabilitation clinics, 17 of which were opened in 2020, and 11 of which were opened during the six months ended June 30, 2021.

Conference Call Information:

At 1:00 p.m. Eastern Time on August 5, 2021, our President and Chief Executive Officer, Katherine Potter, Executive Vice President and Chief Operating Officer, Margaret Wigglesworth, and Executive Vice President, Chief Financial Officer and Treasurer, Jeffrey Leer, will host a conference call to discuss FVE’s second quarter 2021 financial results.

The conference call telephone number is (877) 329-4332. Participants calling from outside the United States and Canada should dial (412) 317-5436. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 11:59 p.m. Eastern Time on August 12, 2021. To hear the replay, dial (412) 317-0088. The replay pass code is 10157589.

A live audio webcast of the conference call will also be available in a listen-only mode on FVE’s website, www.fivestarseniorliving.com. Participants wanting to access the webcast should visit FVE’s website about five minutes before the call. The archived webcast will be available for replay on FVE’s website following the call for about a week. The transcription, recording and retransmission in any way of FVE’ssecond quarter endedJune 30, 2021financial results conference callarestrictly prohibited without the prior written consent ofFVE. FVE’s website is not incorporated as part of this press release.

About Five Star Senior Living Inc.:

FVE is a provider of senior living management and rehabilitation and wellness services to over 23,000 older adults. Five Star is the fifth largest senior living operator in the United States and operates independent and assisted living communities. Additionally, FVE’s rehabilitation and wellness services segment includes Ageility Physical Therapy Solutions™, or Ageility, a division of FVE, which provides rehabilitation and wellness services within FVE communities as well as to external customers. FVE is headquartered in Newton, Massachusetts.

Five Star Senior Living Inc.

Condensed Consolidated Statements of Operations

(amounts in thousands, except per share amounts)

(unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

REVENUES

Rehabilitation and wellness services

$

17,453

$

19,268

$

37,006

$

40,652

Senior living

16,378

19,590

33,435

40,587

Management fees

12,927

15,705

26,777

32,756

Total management and operating revenues

46,758

54,563

97,218

113,995

Reimbursed community-level costs incurred on behalf of managed communities

195,271

224,104

408,431

456,120

Other reimbursed expenses

16,592

6,417

22,072

12,414

Total revenues

258,621

285,084

527,721

582,529

Other operating income

2

1,499

7,795

1,499

OPERATING EXPENSES

Rehabilitation and wellness services expenses

15,668

16,144

31,878

33,645

Senior living wages and benefits

9,896

9,705

21,909

19,505

Other senior living operating expenses

8,968

9,016

15,234

12,954

Community-level costs incurred on behalf of managed communities

195,271

224,104

408,431

456,120

General and administrative

22,748

23,392

45,139

45,162

Restructuring expenses

15,389

175

15,639

1,270

Depreciation and amortization

2,989

2,703

5,929

5,404

Total operating expenses

270,929

285,239

544,159

574,060

Operating (loss) income

(12,306

)

1,344

(8,643

)

9,968

Interest, dividend and other income

76

182

160

521

Interest and other expense

(409

)

(409

)

(872

)

(791

)

Unrealized gain (loss) on equity investments

398

867

533

(595

)

Realized gain on sale of debt and equity investments

97

116

193

95

Loss on termination of leases

—

—

—

(22,899

)

Income (loss) before income taxes

(12,144

)

2,100

(8,629

)

(13,701

)

(Provision) benefit for income taxes

(158

)

902

(358

)

(506

)

Net (loss) income

$

(12,302

)

$

3,002

$

(8,987

)

$

(14,207

)

Weighted average shares outstanding—basic

31,552

31,460

31,541

31,454

Weighted average shares outstanding—diluted

31,552

31,582

31,541

31,454

Net (loss) income per share—basic

$

(0.39

)

$

0.10

$

(0.28

)

$

(0.45

)

Net (loss) income per share—diluted

$

(0.39

)

$

0.10

$

(0.28

)

$

(0.45

)

Five Star Senior Living Inc.

Reconciliation of Non-GAAP Financial Measures

(dollars in thousands)

(unaudited)

Non-GAAP financial measures are financial measures that are not determined in accordance with U.S. generally accepted accounting principles, or GAAP. FVE believes the non-GAAP financial measures presented in the table below are meaningful supplemental disclosures because they may help investors better understand changes in FVE’s operating results and its ability to meet FVE’s financial obligations or service debt, make capital expenditures and expand its business. These non-GAAP financial measures may also help investors make comparisons between FVE and other companies on both a GAAP and non-GAAP basis. FVE believes that EBITDA and Adjusted EBITDA are meaningful financial measures that may help investors better understand its financial performance, including by allowing investors to compare FVE’s performance between periods and to the performance of other companies. FVE management uses EBITDA and Adjusted EBITDA to evaluate FVE’s financial performance and compare FVE’s performance over time and to the performance of other companies. FVE calculates EBITDA and Adjusted EBITDA as shown below. These measures should not be considered as alternatives to net income (loss) or operating income (loss), as indicators of FVE’s operating performance or as measures of FVE’s liquidity. Also, EBITDA and Adjusted EBITDA as presented may not be comparable to similarly titled amounts calculated by other companies.

FVE believes that net income (loss) is the most directly comparable financial measure, determined according to GAAP, to FVE’s presentation of EBITDA and Adjusted EBITDA. The following table presents the reconciliation of these non-GAAP financial measures to net income (loss) for the three and six months ended June 30, 2021 and 2020.

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Net (loss) income

$

(12,302

)

$

3,002

$

(8,987

)

$

(14,207

)

Add (less):

Interest and other expense

409

409

872

791

Interest, dividend and other income

(76

)

(182

)

(160

)

(521

)

(Benefit) provision for income taxes

158

(902

)

358

506

Depreciation and amortization

2,989

2,703

5,929

5,404

EBITDA

(8,822

)

5,030

(1,988

)

(8,027

)

Add (less):

Severance ⁽¹⁾

—

282

—

282

Litigation settlement ⁽²⁾

—

2,473

—

2,473

Unrealized gain (loss) on equity investments

(398

)

(867

)

(533

)

595

Loss on termination of leases ⁽³⁾

—

—

—

22,899

Net restructuring expenses ⁽⁴⁾

3,858

175

4,108

1,270

Long-lived asset impairment ⁽⁵⁾

890

—

890

—

Adjusted EBITDA

$

(4,472

)

$

7,093

$

2,477

$

19,492

_______________________________________

⁽¹⁾

Costs incurred for the three and six months ended June 30, 2020 represent those related to a reduction in workforce.

⁽²⁾

Represents costs incurred related to the settlement of a lawsuit and is included in other senior living operating expenses in our condensed consolidated statements of operations. The settlement was approved by the court, and paid by FVE on May 12, 2021.

⁽³⁾

Represents the excess of the fair value of the shares issued to DHC as of January 1, 2020 of $97,899, compared to the consideration of $75,000 paid by DHC as part of the transaction agreement to restructure FVE’s business arrangements with DHC, or the Restructuring Transactions.

⁽⁴⁾

Includes costs incurred related to the Strategic Plan announced on April 9, 2021 and the Restructuring Transactions for the three and six months ended June 30, 2021 and 2020, respectively, and are included in restructuring expenses in the Condensed Consolidated Statements of Operations, net of reimbursed expenses of $11,531 to be received for the three and six months ended June 30, 2021 from DHC.

⁽⁵⁾

Represents asset impairments related to one leased community that had a fire on April 4, 2021.

Five Star Senior Living Inc.

Condensed Consolidated Balance Sheets

(dollars in thousands, except per share amounts)

(unaudited)

June 30,

December 31,

2021

2020

ASSETS

Current assets:

Cash and cash equivalents

$

99,270

$

84,351

Restricted cash and cash equivalents

23,707

23,877

Accounts receivable, net of allowance

9,036

9,104

Due from related person

80,369

96,357

Debt and equity investments

19,444

19,961

Prepaid expenses and other current assets

20,716

28,658

Total current assets

252,542

262,308

Property and equipment, net

157,636

159,251

Operating lease right-of-use assets

26,277

18,030

Finance lease right-of-use assets

3,929

4,493

Restricted cash and cash equivalents

1,234

1,369

Restricted debt and equity investments

3,945

4,788

Equity investment of an investee, net

11

11

Other long-term assets

6,103

3,956

Total assets

$

451,677

$

454,206

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

21,833

$

23,454

Accrued expenses and other current liabilities

32,231

41,843

Accrued compensation and benefits

80,720

70,543

Accrued self-insurance obligations

30,921

31,355

Operating lease liabilities

2,201

2,567

Finance lease liabilities

840

808

Due to related persons

4,637

6,585

Mortgage note payable

401

388

Security deposits and current portion of continuing care contracts

318

365

Total current liabilities

174,102

177,908

Long-term liabilities:

Accrued self-insurance obligations

39,286

37,420

Operating lease liabilities

25,832

17,104

Finance lease liabilities

3,494

3,921

Mortgage note payable

6,579

6,783

Other long-term liabilities

410

538

Total long-term liabilities

75,601

65,766

Shareholders’ equity:

Common stock, par value $0.01

318

317

Additional paid-in-capital

460,737

460,038

Accumulated deficit

(260,129

)

(251,139

)

Accumulated other comprehensive income

1,048

1,316

Total shareholders’ equity

201,974

210,532

Total liabilities and shareholders’ equity

$

451,677

$

454,206

Five Star Senior Living Inc.

Senior Living Segment Data

(dollars in thousands, except per unit amounts)

(unaudited)

Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

2021

2021

2020

2020

2020

Owned and Leased Communities

Independent and assisted living communities:

Revenues

$

16,378

$

17,057

$

17,903

$

18,525

$

19,590

Other operating income ⁽¹⁾

2

7,774

1,715

—

—

Operating expenses

21,012

20,414

21,181

19,661

20,165

Operating income (loss)

(4,632

)

4,417

(1,563

)

(1,136

)

(575

)

Operating margin

(28.3

)%

17.8

%

(8.0

)%

(6.1

)%

(2.9

)%

Number of communities (end of period)

24

24

24

24

24

Number of living units (end of period) ⁽²⁾

2,251

2,302

2,302

2,312

2,312

Average occupancy

68.1

%

68.3

%

71.5

%

74.7

%

78.3

%

Spot occupancy

69.7

%

68.2

%

69.7

%

73.0

%

76.3

%

RevPAR ⁽³⁾

$

2,425

$

2,479

$

2,596

$

2,665

$

2,813

RevPOR ⁽⁴⁾

$

3,524

$

3,630

$

3,550

$

3,492

$

3,555

Managed Communities⁽⁵⁾

Management fees

$

12,927

$

13,850

$

14,822

$

15,302

$

15,705

Community-level revenues

243,947

259,966

278,637

290,101

304,103

Other operating income ⁽¹⁾

16,564

1,617

12,520

—

5,828

Community-level expenses ⁽⁶⁾

237,461

247,171

261,678

270,333

260,255

Community operating income

23,050

14,412

29,479

19,768

49,676

Community operating margin

8.8

%

5.5

%

10.1

%

6.8

%

16.0

%

Number of communities (end of period)

228

228

228

239

241

Number of living units (end of period) ⁽²⁾

25,482

26,963

26,969

28,232

28,348

Average occupancy

69.5

%

69.5

%

72.2

%

75.2

%

78.7

%

Spot occupancy

71.3

%

70.2

%

70.8

%

74.0

%

77.5

%

RevPAR ⁽³⁾

$

3,086

$

3,213

$

3,355

$

3,420

$

3,576

RevPOR ⁽⁴⁾

$

4,389

$

4,623

$

4,543

$

4,447

$

4,496

_______________________________________

⁽¹⁾

Other operating income represents income recognized for funds received under the CARES Act and other governmental grants.

⁽²⁾

Includes living units categorized as in service. As a result, the number of living units may vary from period to period for reasons other than the acquisition or disposition of senior living communities.

⁽³⁾

RevPAR is defined by FVE as resident fee revenues for the corresponding portfolio for the period divided by the average number of available units for the period, divided by the number of months in the period. Data for the three months ended June 30, 2020, December 31, 2020, March 31, 2021 and June 30, 2021 exclude income received by communities under the CARES Act and other governmental grants.

⁽⁴⁾

RevPOR is defined by FVE as resident fee revenues for the corresponding portfolio for the period divided by the average number of occupied units for the period, divided by the number of months in the period. Data for the three months ended June 30, 2020, December 31, 2020, March 31, 2021 and June 30, 2021 exclude income received by communities under the CARES Act and other governmental grants.

⁽⁵⁾

Managed communities, other than FVE’s management fees, represents financial data of communities FVE manages for the account of DHC and does not represent financial results of FVE. Managed communities’ data is included to provide supplemental information regarding the operating results and financial condition of the communities from which FVE earns management fees.

⁽⁶⁾

The three months ended June 30, 2021 includes restructuring expense of $11,531.

Five Star Senior Living Inc.

Comparable Communities Senior Living Segment Data

(dollars in thousands, except per unit amounts)

(unaudited)

Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

2021

2021

2020

2020

2020

Owned and Leased Communities⁽¹⁾:

Number of communities (end of period)

23

23

23

23

23

Number of living units (end of period) ⁽²⁾

2,251

2,251

2,250

2,260

2,260

Average Occupancy

68.0

%

68.6

%

72.1

%

75.1

%

78.6

%

Spot Occupancy

69.7

%

68.6

%

70.0

%

73.5

%

76.6

%

RevPAR ⁽³⁾

$

2,421

$

2,480

$

2,605

$

2,668

$

2,811

RevPOR ⁽⁴⁾

$

3,520

$

3,613

$

3,534

$

3,475

$

3,538

Managed Communities⁽¹⁾⁽⁵⁾:

Number of communities (end of period)

120

120

120

120

120

Number of living units (end of period) ⁽²⁾

17,898

17,906

17,910

17,929

17,929

Average Occupancy

72.9

%

72.7

%

75.6

%

78.5

%

82.6

%

Spot Occupancy

73.3

%

73.2

%

74.2

%

77.0

%

81.1

%

RevPAR ⁽³⁾

$

2,961

$

2,946

$

3,054

$

3,139

$

3,301

RevPOR ⁽⁴⁾

$

4,018

$

4,051

$

3,954

$

3,942

$

3,953

_______________________________________

⁽¹⁾

Includes data for senior living communities that FVE has continuously owned, leased or managed since April 1, 2020. Per the Strategic Plan, the summary of operations for comparable communities excludes (i) 108 senior living communities managed on behalf of DHC, with approximately 7,500 living units, that are expected to be transitioned to new operators and (ii) 1,473 SNF units in 26 CCRCs that were closed during the three months ended June 30, 2021 and are in the process of being repositioned and an additional 59 SNF units that are expected to be closed and repositioned in one CCRC that FVE will continue to manage for DHC. Comparable communities also excludes one leased community with 51 living units that has been out of service due to a fire on April 4, 2021. In addition, the landlord of three leased communities included in the 23 owned and leased senior living communities data above is currently marketing these properties for sale and FVE is unlikely to operate these communities long-term.

⁽²⁾

Includes living units categorized as in service. As a result, the number of living units may vary from period to period for reasons other than the acquisition or sale of senior living communities.

⁽³⁾

RevPAR is defined by FVE as resident fee revenues for the corresponding portfolio for the period divided by the average number of available units for the period, divided by the number of months in the period. Data for the three months ended June 30, 2020, December 31, 2020, March 31, 2021 and June 30, 2021 exclude income received by communities under the CARES Act and other governmental grants.

⁽⁴⁾

RevPOR is defined by FVE as resident fee revenues for the corresponding portfolio for the period divided by the average number of occupied units for the period, divided by the number of months in the period. Data for the three months ended June 30, 2020, December 31, 2020, March 31, 2021 and June 30, 2021 exclude income received by communities under the CARES Act and other governmental grants.

⁽⁵⁾

Senior living segment data for comparable managed communities represents financial data of communities FVE manages for the account of DHC and does not represent financial results of FVE. Managed communities’ data is included to provide supplemental information regarding the operating results and financial condition of the communities from which FVE earns management fees.

Five Star Senior Living Inc.

Rehabilitation and Wellness Services Segment Data

(dollars in thousands)

(unaudited)

Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

2021

2021

2020

2020

2020

Rehabilitation and Wellness Services⁽¹⁾:

Revenues

$

17,453

$

19,553

$

20,256

$

21,124

$

19,268

Other operating income ⁽²⁾

—

19

221

—

1,499

Operating expenses ⁽³⁾

17,517

16,338

16,613

16,833

16,259

Operating (loss) income

(64

)

3,234

3,864

4,291

4,508

Operating margin

(0.4

)%

16.5

%

18.9

%

20.3

%

21.7

%

Number of inpatient clinics (end of period)

10

37

37

40

40

Number of outpatient clinics (end of period)

218

215

207

209

206

_______________________________________

⁽¹⁾

Includes Ageility clinics and home health operations.

⁽²⁾

Other operating income represents income recognized for funds received under the CARES Act and other governmental grants.

⁽³⁾

The three months ended June 30, 2021 includes restructuring expenses of $1,720.

Five Star Senior Living Inc.

Comparable Rehabilitation and Wellness Services Segment Data

(dollars in thousands)

(unaudited)

Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

2021

2021

2020

2020

2020

Rehabilitation and Wellness Services⁽¹⁾:

Revenues

$

14,151

$

13,457

$

13,800

$

14,493

$

13,292

Other operating income ⁽²⁾

—

19

221

—

848

Operating expenses

12,564

11,679

12,112

12,087

11,772

Operating income

1,587

1,797

1,909

2,406

2,368

Operating margin

11.2

%

13.3

%

13.6

%

16.6

%

16.7

%

Number of inpatient clinics (end of period)

—

—

—

—

—

Number of outpatient clinics (end of period)

195

195

195

195

195

_______________________________________

⁽¹⁾

Includes Ageility clinics and home health operations. Comparable clinics includes data for 195 outpatient clinics that FVE has continuously owned and operated since April 1, 2020, exclusive of 27 Ageility inpatient rehabilitation clinics that were closed during the three months ended June 30, 2021 and an additional ten Ageility inpatient rehabilitation clinics that are expected to be closed during the remainder of 2021.

⁽²⁾

Other operating income represents income recognized for funds received under the CARES Act and other governmental grants.

Five Star Senior Living Inc.

Owned Senior Living Communities as of and for the Three Months Ended June 30, 2021

(dollars in thousands)

(unaudited)

No.

Community Name

State

Property Type ⁽¹⁾

Living Units

Senior Living Revenues ⁽⁴⁾

Gross Carrying Value

Net Carrying Value

Date Acquired

Year Built or Most Recent Renovation

1

Morningside of Decatur ⁽²⁾

Alabama

AL

49

$

271

$

6,938

$

3,736

11/19/2004

1999

2

Morningside of Auburn

Alabama

AL

42

297

1,578

586

11/19/2004

1997

3

The Palms of Fort Myers ⁽²⁾

Florida

IL

218

1,601

6,990

3,755

4/1/2002

1988

4

Five Star Residences of Banta Pointe ⁽³⁾

Indiana

AL

121

664

10,575

6,232

9/29/2011

2006

5

Five Star Residences of Fort Wayne ⁽²⁾

Indiana

AL

154

1,021

8,495

5,244

9/29/2011

1998

6

Five Star Residences of Clearwater

Indiana

AL

88

341

13,871

8,928

6/1/2011

1999

7

Five Star Residences of Lafayette ⁽²⁾

Indiana

AL

109

532

11,144

7,144

6/1/2011

2000

8

Five Star Residences of Noblesville ⁽²⁾

Indiana

AL

151

1,033

12,900

8,085

7/1/2011

2005

9

The Villa at Riverwood ⁽²⁾

Missouri

IL

111

635

4,160

2,583

4/1/2002

1986

10

Voorhees Senior Living ⁽²⁾

New Jersey

AL

104

892

19,004

13,062

7/1/2008

1999

11

Washington Township Senior Living ⁽²⁾

New Jersey

AL

93

958

26,010

17,545

7/1/2008

1998

12

Carriage House Senior Living

North Carolina

AL

98

845

9,813

5,403

12/1/2008

1997

13

Forest Heights Senior Living

North Carolina

AL

111

710

16,085

10,806

12/1/2008

1998

14

Fox Hollow Senior Living ⁽²⁾

North Carolina

AL

77

1,000

25,487

17,537

7/1/2000

1999

15

Legacy Heights Senior Living ⁽²⁾

North Carolina

AL

116

1,012

7,048

3,195

12/1/2008

1997

16

Morningside at Irving Park

North Carolina

AL

91

746

3,731

1,675

11/19/2004

1997

17

The Devon Senior Living

Pennsylvania

AL

84

481

31,580

14,808

7/1/2008

1985

18

The Legacy of Anderson

South Carolina

IL

101

549

10,617

6,231

12/1/2008

2003

19

Morningside of Springfield ⁽²⁾

Tennessee

AL

54

428

17,613

10,973

11/19/2004

1984

20

Huntington Place

Wisconsin

AL

127

826

2,355

1,514

7/15/2010

1999

Total

2,099

$

14,842

$

245,994

$

149,042

_______________________________________

(1)

AL is primarily an assisted living community and IL is primarily an independent living community.

(2)

Encumbered property under FVE’s $65,000 revolving credit facility.

(3)

Encumbered property under FVE’s $6,980 mortgage note.

(4)

Excludes funds received under the CARES Act recognized as other operating income.

Warning Concerning Forward-Looking Statements

This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever Five Star Senior Living Inc. uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions, FVE is making forward-looking statements. These forward-looking statements are based upon FVE’s present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by FVE’s forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond FVE’s control. For example:

This press release includes statements regarding the actions that have occurred and steps that are expected to be taken in connection with the implementation of FVE’s Strategic Plan and the anticipated timing, costs, savings and benefits related to such steps, as well as FVE’s expectations for the operation and performance of the business following implementation of the Strategic Plan. FVE may not be able to implement each of its strategic initiatives in a timely manner or at all, the costs of such initiatives may be more than it expects, it may not realize the benefits it anticipates from the Strategic Plan, and it may not be able to achieve its objectives following implementation of such Strategic Plan, including partially offsetting the revenue loss from the communities it intends to transition with expense reductions to right-size operations, on the anticipated timeline or at all.

Ms. Potter states that COVID-19 vaccination levels have increased across FVE’s senior living portfolio and FVE remains on target to vaccinate all community team members by September 1, 2021. However, FVE may not achieve its goal of vaccinating all team member by September 1, 2021 and, despite the high rate of vaccinations, certain residents, team members and clients may still become infected with COVID-19, and the perception of potential infections may reduce the number of new residents moving into FVE’s communities, which could impact FVE’s operations and financial performance.

Ms. Potter states that FVE is encouraged by positive momentum in occupancy trends. However, these trends may not continue and occupancy could decline due to a variety of factors, including as a result of the COVID-19 pandemic.

This press release includes statements regarding FVE’s intent to expand its Ageility business and growing and diversifying FVE’s rehabilitation and wellness offerings. FVE may not be able to achieve these objectives, including if its growth is adversely impacted by the COVID-19 pandemic, and if it does not have sufficient resources to fund the expansion or does not identify new opportunities to grow or diversify the business.

The information contained in FVE’s filings with the Securities and Exchange Commission, or SEC, including under “Risk Factors” in FVE’s periodic reports, or incorporated therein, identifies other important factors that could cause FVE’s actual results to differ materially from those stated in or implied by FVE’s forward-looking statements. FVE’s filings with the SEC are available on the SEC’s website at www.sec.gov.

You should not place undue reliance upon forward-looking statements.

Except as required by law, FVE does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210804006004/en/

Olivia Snyder, Manager, Investor Relations

(617) 796-8245

KEYWORDS: United States North America Massachusetts

INDUSTRY KEYWORDS: Nursing Health Consumer Hospitals Seniors Other Health Managed Care

MEDIA:

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Posted on August 4, 2021 4:19 pm
MBIA Inc. Reports Second Quarter 2021 Financial Results

MBIA Inc. Reports Second Quarter 2021 Financial Results

PURCHASE, N.Y.–(BUSINESS WIRE)–
MBIA Inc. (NYSE:MBI) today posted its second quarter 2021 financial results on its website at https://investor.mbia.com/investor-relations/financial-information/default.aspx. The financial results will also be furnished to the Securities and Exchange Commission (SEC) on a Current Report on Form 8-K available at sec.gov.

As previously announced, the Company will host a webcast and conference call for investors on Thursday, August 5 at 8:00 a.m. (ET) to discuss its financial results and other issues related to the Company. The conference call webcast will be available on MBIA’s website at https://investor.mbia.com/investor-relations/events-and-presentations/default.aspx.

MBIA Inc., headquartered in Purchase, New York, is a holding company whose subsidiaries provide financial guarantee insurance for the public and structured finance markets. Please visit MBIA’s website at www.mbia.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210804006003/en/

MBIA Inc.

Greg Diamond, 914-765-3190

Managing Director

Investor and Media Relations

[email protected]

KEYWORDS: United States North America New York

INDUSTRY KEYWORDS: Banking Professional Services Insurance Finance

MEDIA:

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Posted on August 4, 2021 4:19 pm
DCP Midstream Reports Second Quarter Results and Guides to High End of Financial Guidance Range

DENVER, Aug. 04, 2021 (GLOBE NEWSWIRE) — Today, DCP Midstream, LP (NYSE: DCP) reported its financial results for the three and six months ended June 30, 2021.

HIGHLIGHTS

For the respective three and six months ended June 30, 2021, DCP had net (loss) income attributable to partners of $(31) million and $22 million, net cash provided by operating activities of $72 million and $68 million, adjusted EBITDA of $333 million and $608 million, and distributable cash flow of $225 million and $400 million.

Second quarter adjusted EBITDA and DCF increased by 21% and 29% from first quarter 2021.

Generated $132 million of excess free cash flow for the three months ended June 30, 2021 and $221 million for the six months ended June 30, 2021 after fully funding distributions and growth capital.

Excess FCF generated in second quarter 2021 represents a 48% increase from first quarter 2021 and a 144% increase from second quarter 2020.

Gathering & Processing average wellhead volumes increased from first quarter 2021 by 6% due to improved volumes across all four regions.

Logistics & Marketing throughput volumes increased by 16% from first quarter 2021 due to improved Sand Hills and Southern Hills volumes.

Guiding towards high end of adjusted EBITDA, DCF, and excess FCF guidance ranges due to strong first half results, favorable commodity price outlook, and improving volumes.

Issued Second Annual Sustainability Report and set forward-looking targets, including:

Long-term emissions reduction targets of reducing Scope 1 and 2 greenhouse gas emissions by 30% by 2030 and ultimately achieving net zero emissions by 2050;

Inclusion and diversity targets to ensure workforce and leadership fully represent the gender and racial demographics of the communities in which we operate by 2028.

SECOND QUARTER 2021 SUMMARY FINANCIAL RESULTS

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

(Unaudited)

(Millions, except per unit amounts)

Net (loss) income attributable to partners $ (31 ) $ 47 $ 22 $ (503 )

Net (loss) income per limited partner unit – basic and diluted $ (0.22 ) $ 0.15 $ (0.03 ) $ (2.55 )

Net cash provided by operating activities $ 72 $ 209 $ 68 $ 523

Adjusted EBITDA(1) $ 333 $ 311 $ 608 $ 632

Distributable cash flow(1) $ 225 $ 220 $ 400 $ 440

Excess free cash flow(1) $ 132 $ 54 $ 221 $ 22

This press release includes the following financial measures not presented in accordance with U.S. generally accepted accounting principles, or GAAP: adjusted EBITDA, distributable cash flow, excess free cash flow, and adjusted segment EBITDA. Each such non-GAAP financial measure is defined below under “Non-GAAP Financial Information”, and each is reconciled to its most directly comparable GAAP financial measure under “Reconciliation of Non-GAAP Financial Measures” in schedules at the end of this press release.

CEO’S PERSPECTIVE

“Our team reported another strong quarter of earnings, positioning us to deliver financial results at the high end of our 2021 guidance and building momentum as we head into 2022,” said Wouter van Kempen, chairman, president, and CEO. “Additionally, we’re proud to highlight the team’s accomplishment in reducing Scope 1 and Scope 2 greenhouse gas emissions by 16% since 2018. In a continuation of this effort, we have committed to further reduce our emissions in the coming years, with goals of reaching a 30% reduction by 2030 and achieving net zero emissions by 2050. I have full confidence that our team will accomplish these aggressive goals while creating incremental value for all DCP stakeholders.”

COMMON UNIT DISTRIBUTIONS

On July 20, 2021, DCP announced a quarterly common unit distribution of $0.39 per limited partner unit. This distribution remains unchanged from the previous quarter.

DCP generated distributable cash flow of $225 million and $400 million for three and six months ended June 30, 2021, respectively. Distributions declared were $82 million and $163 million for the three and six months ended June 30, 2021, respectively.

SECOND QUARTER 2021 OPERATING RESULTS BY BUSINESS SEGMENT

Logistics
and Marketing

Logistics and Marketing segment net income attributable to partners for the three months ended June 30, 2021 and 2020 was $109 million and $177 million, respectively.

Adjusted segment EBITDA decreased to $194 million for the three months ended June 30, 2021, from $213 million for the three months ended June 30, 2020, reflecting lower earnings from NGL and gas marketing, partially offset by an increase in Southern Hills volumes.

The following table represents volumes for the Logistics and Marketing segment:

Three Months Ended
June 30, 2021 Three Months Ended
March 31, 2021 Three Months Ended

June 30, 2020

NGL Pipeline % Owned Net Pipeline
Capacity (MBbls/d) Average NGL
Throughput (MBpd) Average NGL
Throughput (MBpd) Average NGL
Throughput (MBpd)

Sand Hills 67 % 333 288 228 312

Southern Hills 67 % 128 116 105 100

Front Range 33 % 87 60 56 56

Texas Express 10 % 37 21 19 19

Other Various 310 186 170 189

Total 895 671 578 676

Gathering and Processing

Gathering and Processing segment net income attributable to partners for the three months ended June 30, 2021 and 2020 was $3 million and $11 million, respectively.

Adjusted segment EBITDA increased to $197 million for the three months ended June 30, 2021, from $158 million for the three months ended June 30, 2020, reflecting higher commodity prices, higher wellhead volumes in the North, partially offset by lower volumes in the South and Permian, and increased operating costs.

The following table represents volumes for the Gathering and Processing segment:

Three Months Ended
June 30, 2021 Three Months Ended
June 30, 2021 Three Months Ended
March 31, 2021 Three Months Ended
June 30, 2020

System Net Plant/Treater
Capacity (MMcf/d) Average Wellhead
Volumes (MMcf/d) Average Wellhead
Volumes (MMcf/d) Average Wellhead
Volumes (MMcf/d)

North 1,580 1,540 1,520 1,531

Midcontinent 1,110 850 799 842

Permian 1,200 926 858 987

South 1,730 1,022 900 1,127

Total 5,620 4,338 4,077 4,487

CREDIT FACILITIES AND DEBT

DCP has two credit facilities with up to $1.75 billion of total capacity. Proceeds from these facilities can be used for working capital requirements and other general partnership purposes including growth and acquisitions.

DCP has a $1.4 billion senior unsecured revolving credit agreement, or the Credit Agreement, that matures on December 9, 2024. As of June 30, 2021, total unused borrowing capacity under the Credit Agreement was $780 million net of $618 million of outstanding borrowings and $2 million of letters of credit.

DCP has an accounts receivable securitization facility that provides up to $350 million of borrowing capacity that matures August 12, 2024. As of June 30, 2021, DCP had $350 million of outstanding borrowings under the accounts receivable securitization facility.

As of June 30, 2021, DCP had $5.7 billion of total consolidated principal debt outstanding. The total debt outstanding includes $550 million of junior subordinated notes which are excluded from debt pursuant to DCP’s Credit Agreement leverage ratio calculation. For the twelve months ended June 30, 2021, DCP’s leverage ratio was 4.2 times. The effective interest rate on DCP’s overall debt position, as of June 30, 2021, was 4.90%.

CAPITAL EXPENDITURES AND INVESTMENTS

During the three months ended June 30, 2021, DCP had expansion capital expenditures and equity investments totaling $11 million, and sustaining capital expenditures totaling $17 million.

SECOND QUARTER 2021 EARNINGS CALL

DCP will host a conference call webcast tomorrow, August 5, 2021, at 10:00 a.m. ET, to discuss its second quarter earnings. The live audio webcast of the conference call and presentation slides can be accessed through the Investors section on the DCP website at www.dcpmidstream.com and the conference call can be accessed by dialing (844) 233-0113 in the United States or (574) 990-1008 outside the United States. The conference confirmation number is 6537779. An audio webcast replay, presentation slides and transcript will also be available by accessing the Investors section on the DCP website.

NON-GAAP FINANCIAL INFORMATION

This press release and the accompanying financial schedules include the following non-GAAP financial measures: adjusted EBITDA, distributable cash flow, excess free cash flow and adjusted segment EBITDA. The accompanying schedules provide reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures. DCP’s non-GAAP financial measures should not be considered in isolation or as an alternative to its financial measures presented in accordance with GAAP, including operating revenues, net income or loss attributable to partners, net cash provided by or used in operating activities or any other measure of liquidity or financial performance presented in accordance with GAAP as a measure of operating performance, liquidity or ability to service debt obligations and make cash distributions to unitholders. The non-GAAP financial measures presented by DCP may not be comparable to similarly titled measures of other companies because they may not calculate their measures in the same manner.

DCP defines adjusted EBITDA as net income or loss attributable to partners adjusted for (i) distributions from unconsolidated affiliates, net of earnings, (ii) depreciation and amortization expense, (iii) net interest expense, (iv) noncontrolling interest in depreciation and income tax expense, (v) unrealized gains and losses from commodity derivatives, (vi) income tax expense or benefit, (vii) impairment expense and (viii) certain other non-cash items. Adjusted EBITDA further excludes items of income or loss that we characterize as unrepresentative of our ongoing operations. Management believes these measures provide investors meaningful insight into results from ongoing operations.

The commodity derivative non-cash losses and gains result from the marking to market of certain financial derivatives used by us for risk management purposes that we do not account for under the hedge method of accounting. These non-cash losses or gains may or may not be realized in future periods when the derivative contracts are settled, due to fluctuating commodity prices.

Adjusted EBITDA is used as a supplemental liquidity and performance measure and adjusted segment EBITDA is used as a supplemental performance measure by DCP’s management and by external users of its financial statements, such as investors, commercial banks, research analysts and others to assess:

financial performance of DCP’s assets without regard to financing methods, capital structure or historical cost basis;

DCP’s operating performance and return on capital as compared to those of other companies in the midstream energy industry, without regard to financing methods or capital structure;

viability and performance of acquisitions and capital expenditure projects and the overall rates of return on investment opportunities;

performance of DCP’s business excluding non-cash commodity derivative gains or losses; and

in the case of adjusted EBITDA, the ability of DCP’s assets to generate cash sufficient to pay interest costs, support its indebtedness, make cash distributions to its unitholders and pay capital expenditures.

DCP defines adjusted segment EBITDA for each segment as segment net income or loss attributable to partners adjusted for (i) distributions from unconsolidated affiliates, net of earnings, (ii) depreciation and amortization expense, (iii) net interest expense, (iv) noncontrolling interest in depreciation and income tax expense, (v) unrealized gains and losses from commodity derivatives, (vi) income tax expense or benefit, (vii) impairment expense and (viii) certain other non-cash items. Adjusted segment EBITDA further excludes items of income or loss that we characterize as unrepresentative of our ongoing operations for that segment.

DCP defines distributable cash flow as adjusted EBITDA less sustaining capital expenditures, net of reimbursable projects, interest expense, cumulative cash distributions earned by the Series A, Series B and Series C Preferred Units (collectively the “Preferred Limited Partnership Units”) and certain other items.

DCP defines excess free cash flow as distributable cash flow, as defined above, less distributions to limited partners, less expansion capital expenditures, net of reimbursable projects, and contributions to equity method investments, and less certain other items. Expansion capital expenditures are cash expenditures to increase DCP’s cash flows, operating or earnings capacity. Expansion capital expenditures add on to or improve the capital assets owned, or acquire or construct new gathering lines and well connects, treating facilities, processing plants, fractionation facilities, pipelines, terminals, docks, truck racks, tankage and other storage, distribution or transportation facilities and related or similar midstream assets.

Sustaining capital expenditures are cash expenditures made to maintain DCP’s cash flows, operating capacity or earnings capacity. These expenditures add on to or improve capital assets owned, including certain system integrity, compliance and safety improvements. Sustaining capital expenditures also include certain well connects, and may include the acquisition or construction of new capital assets. Income attributable to preferred units represent cash distributions earned by the Preferred Limited Partnership Units. Cash distributions to be paid to the holders of the Preferred Limited Partnership Units, assuming a distribution is declared by DCP’s board of directors, are not available to common unit holders. Non-cash mark-to-market of derivative instruments is considered to be non-cash for the purpose of computing distributable cash flow because settlement will not occur until future periods, and will be impacted by future changes in commodity prices and interest rates. DCP compares the distributable cash flow it generates to the cash distributions it expects to pay to its partners. Distributable cash flow is used as a supplemental liquidity and performance measure by DCP’s management and by external users of its financial statements, such as investors, commercial banks, research analysts and others, to assess DCP’s ability to make cash distributions to its unitholders. Excess free cash flow is used as a supplemental liquidity and performance measure by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others, and is useful to investors and management as a measure of our ability to generate cash particularly in light of an ongoing transition in the midstream industry that has shifted investor focus from distribution growth to capital discipline, cost efficiency, and balance-sheet strength. Once business needs and obligations are met, including cash reserves to provide funds for distribution payments on our units and the proper conduct of our business, which includes cash reserves for future capital expenditures and anticipated credit needs, this cash can be used to reduce debt, reinvest in the company for future growth, or return to unitholders.

ABOUT DCP MIDSTREAM, LP

DCP Midstream, LP (NYSE: DCP) is a Fortune 500 midstream master limited partnership headquartered in Denver, Colorado, with a diversified portfolio of gathering, processing, logistics and marketing assets. DCP is one of the largest natural gas liquids producers and marketers, and one of the largest natural gas processors in the U.S. The owner of DCP’s general partner is a joint venture between Enbridge and Phillips 66. For more information, visit the DCP Midstream, LP website at www.dcpmidstream.com.

CAUTIONARY STATEMENTS

This press release may contain or incorporate by reference forward-looking statements as defined under the federal securities laws regarding DCP Midstream, LP, including projections, estimates, forecasts, plans and objectives. Although management believes that expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be correct. In addition, these statements are subject to certain risks, uncertainties and other assumptions that are difficult to predict and may be beyond DCP’s control. If any of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, DCP’s actual results may vary materially from what management forecasted, anticipated, estimated, projected or expected.

The key risk factors that may have a direct bearing on DCP’s results of operations and financial condition are described in detail in the “Risk Factors” section of DCP’s most recently filed annual report and subsequently filed quarterly reports with the Securities and Exchange Commission. Investors are encouraged to closely consider the disclosures and risk factors contained in DCP’s annual and quarterly reports filed from time to time with the Securities and Exchange Commission. The forward looking statements contained herein speak as of the date of this announcement. DCP undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Information contained in this press release is unaudited and subject to change.

Investors or Analysts:

Mike Fullman

[email protected]

303-605-1628

DCP MIDSTREAM, LP

FINANCIAL RESULTS AND

SUMMARY FINANCIAL DATA

(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(Millions, except per unit amounts)

Sales of natural gas, NGLs and condensate $ 2,113 $ 1,172 $ 4,682 $ 2,565

Transportation, processing and other 125 109 243 221

Trading and marketing (losses) gains, net (153 ) (7 ) (522 ) 145

Total operating revenues 2,085 1,274 4,403 2,931

Purchases and related costs (1,839 ) (974 ) (3,876 ) (2,120 )

Operating and maintenance expense (165 ) (148 ) (314 ) (301 )

Depreciation and amortization expense (93 ) (93 ) (184 ) (192 )

General and administrative expense (57 ) (51 ) (95 ) (107 )

Asset impairments (20 ) — (20 ) (746 )

Loss on sale of assets, net (1 ) — (1 ) —

Restructuring costs — (9 ) — (9 )

Other income (expense) 6 (5 ) 6 (8 )

Total operating costs and expenses (2,169 ) (1,280 ) (4,484 ) (3,483 )

Operating loss (84 ) (6 ) (81 ) (552 )

Interest expense, net (77 ) (71 ) (154 ) (149 )

Earnings from unconsolidated affiliates 131 125 259 201

Income tax expense — — — (1 )

Net income attributable to noncontrolling interests (1 ) (1 ) (2 ) (2 )

Net (loss) income attributable to partners (31 ) 47 22 (503 )

Series A preferred partner’s interest in net income (10 ) (10 ) (19 ) (19 )

Series B preferred partner’s interest in net income (3 ) (3 ) (6 ) (6 )

Series C preferred partner’s interest in net income (2 ) (2 ) (4 ) (4 )

Net (loss) income allocable to limited partners $ (46 ) $ 32 $ (7 ) $ (532 )

Net (loss) income per limited partner unit — basic and diluted $ (0.22 ) $ 0.15 $ (0.03 ) $ (2.55 )

Weighted-average limited partner units outstanding — basic 208.4 208.3 208.4 208.3

Weighted-average limited partner units outstanding — diluted 208.4 208.7 208.4 208.3

June 30, December 31,

2021 2020

(Millions)

Cash and cash equivalents $ 5 $ 52

Other current assets 1,517 956

Property, plant and equipment, net 7,837 7,993

Other long-term assets 3,941 3,956

Total assets $ 13,300 $ 12,957

Current liabilities $ 1,454 $ 1,116

Current debt 354 505

Long-term debt 5,388 5,119

Other long-term liabilities 407 356

Partners’ equity 5,670 5,834

Noncontrolling interests 27 27

Total liabilities and equity $ 13,300 $ 12,957

DCP MIDSTREAM, LP

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(Millions)

Reconciliation of Non-GAAP Financial Measures:

Net (loss) income attributable to partners $ (31 ) $ 47 $ 22 $ (503 )

Interest expense, net 77 71 154 149

Depreciation, amortization and income tax expense, net of noncontrolling interests 91 92 182 192

Distributions from unconsolidated affiliates, net of earnings 39 42 40 119

Asset impairments 20 — 20 746

Other non-cash charges 1 2 1 6

Non-cash commodity derivative mark-to-market 136 57 189 (77 )

Adjusted EBITDA 333 311 608 632

Interest expense, net (77 ) (71 ) (154 ) (149 )

Sustaining capital expenditures, net of noncontrolling interest portion and reimbursable projects (a) (17 ) (6 ) (27 ) (16 )

Distributions to preferred limited partners (b) (15 ) (15 ) (29 ) (29 )

Other, net 1 1 2 2

Distributable cash flow 225 220 400 440

Distributions to limited partners (82 ) (81 ) (163 ) (243 )

Expansion capital expenditures and equity investments, net of reimbursable projects (11 ) (84 ) (15 ) (173 )

Other, net — (1 ) (1 ) (2 )

Excess free cash flow $ 132 $ 54 $ 221 $ 22

Net cash provided by operating activities $ 72 $ 209 $ 68 $ 523

Interest expense, net 77 71 154 149

Net changes in operating assets and liabilities 53 (19 ) 205 57

Non-cash commodity derivative mark-to-market 136 57 189 (77 )

Other, net (5 ) (7 ) (8 ) (20 )

Adjusted EBITDA 333 311 608 632

Interest expense, net (77 ) (71 ) (154 ) (149 )

Sustaining capital expenditures, net of noncontrolling interest portion and reimbursable projects (a) (17 ) (6 ) (27 ) (16 )

Distributions to preferred limited partners (b) (15 ) (15 ) (29 ) (29 )

Other, net 1 1 2 2

Distributable cash flow 225 220 400 440

Distributions to limited partners (82 ) (81 ) (163 ) (243 )

Expansion capital expenditures and equity investments, net of reimbursable projects (11 ) (84 ) (15 ) (173 )

Other, net — (1 ) (1 ) (2 )

Excess free cash flow $ 132 $ 54 $ 221 $ 22

Excludes reimbursements for leasehold improvements

Represents cumulative cash distributions earned by the Series A, B and C Preferred Units, assuming distributions are declared by DCP’s board of directors.

DCP MIDSTREAM, LP

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

SEGMENT FINANCIAL RESULTS AND OPERATING DATA

(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(Millions, except as indicated)

Logistics and Marketing Segment:

Financial results:

Segment net income attributable to partners $ 109 $ 177 $ 255 $ 413

Non-cash commodity derivative mark-to-market 35 (5 ) 40 (47 )

Depreciation and amortization expense 3 3 6 6

Distributions from unconsolidated affiliates, net of earnings 34 37 35 47

Asset impairments 13 — 13 —

Other charges — 1 — 2

Adjusted segment EBITDA $ 194 $ 213 $ 349 $ 421

Operating and financial data:

NGL pipelines throughput (MBbls/d) 671 676 625 677

NGL fractionator throughput (MBbls/d) 51 51 47 54

Operating and maintenance expense $ 12 $ 9 $ 18 $ 16

Gathering and Processing Segment:

Financial results:

Segment net income (loss) attributable to partners $ 3 $ 11 $ 30 $ (634 )

Non-cash commodity derivative mark-to-market 101 62 149 (30 )

Depreciation and amortization expense, net of noncontrolling interest 80 81 161 170

Asset impairments 7 — 7 746

Distributions from unconsolidated affiliates, net of losses 5 5 5 72

Other charges 1 (1 ) 1 2

Adjusted segment EBITDA $ 197 $ 158 $ 353 $ 326

Operating and financial data:

Natural gas wellhead (MMcf/d) 4,338 4,487 4,206 4,713

NGL gross production (MBbls/d) 409 376 385 390

Operating and maintenance expense $ 146 $ 134 $ 286 $ 276

DCP MIDSTREAM, LP

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Unaudited)

Twelve Months Ended

December 31, 2021

Low High

Forecast Forecast

(millions)

Reconciliation of Non-GAAP Measures:

Forecasted net income attributable to partners $ 335 $ 475

Distributions from unconsolidated affiliates, net of earnings 120 120

Interest expense, net of interest income 300 300

Income taxes 5 5

Depreciation and amortization, net of noncontrolling interests 365 365

Non-cash commodity derivative mark-to-market and other (5 ) (5 )

Forecasted adjusted EBITDA 1,120 1,260

Interest expense, net of interest income (300 ) (300 )

Sustaining capital expenditures, net of reimbursable projects (45 ) (85 )

Preferred unit distributions *** (60 ) (60 )

Other, net (5 ) (5 )

Forecasted distributable cash flow 710 810

Distributions to limited partners and general partner (325 ) (325 )

Expansion capital expenditures and equity investments (75 ) (25 )

Forecasted excess free cash flow $ 310 $ 460

*** Represents cumulative cash distributions earned by the Series A, B and C Preferred Units, assuming distributions are declared by DCP’s board of directors.

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